AMBBY (AMBBY) Q3 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Ambu Earnings Release Q3 2025-'26 Conference Call. I'm Vicki, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Britt Meelby Jensen, CEO. Please go ahead.

Thank you, and good morning, everyone, and welcome to this earnings call for our Q3 '25-'26 results. My name is Britt Meelby Jensen. I'm the CEO of Ambu, and I have Henrik Skak Bender, our CFO, with me today. So if we move to the next slide and then the next one again, I'll start with a review of our business and progress before I hand over to Henrik to go through our financials. And starting on the next slide, please, with the highlights for Q3. Overall, we see a very strong shift towards single-use endoscopy. We continue to lead this conversion to single-use by bringing new innovative solutions to the market that can address a wide range of procedures, also supported by key opinion leaders across the different areas that we are in. In the quarter, this was most evident in the reacceleration we have seen in Respiratory, which, as you know, is the first area we entered. Here, we grew 17.1%, which was driven by our bronchoscopy portfolio, but supported by the strong synergistic effect from our new videolaryngoscope solution, SureSight. In Urology, we grew Urology, ENT & GI. We grew 15% in the quarter, resulting in a 16% growth overall of Endoscopy Solutions. In A&PM, after 2 quarters of negative growth, we returned to positive growth with 1.6%. And we also announced recently a new solution, Neuroline Cup MRI/CT, that is positioned to support further growth recovery. Our EBIT margin came in at 13.5%, both reflecting increased investments and partly offset both by tariff reclaims and scalability. We expect the reported EBIT margin to land in the upper end of our 12% to 14% guidance. And in line with the communication that we had in Q2, that we were trending towards 10% organic growth for the full fiscal year, we are confirming this as we are updating our revenue guidance to around 10% growth. So in total, we continue to be very well positioned to deliver strong organic growth and increased profitability over our ZOOM AHEAD period. Let's turn to the next page, please. And here, you see a lot of numbers as usual. And overall, these reflect a very strong financial position, cash generation and high revenue growth. So specifically, as I just mentioned, I want to highlight the 16% Endoscopy growth and that this segment now represents 64% of our business. While A&PM has turned to positive growth, the volume uplift will take some time. So the low single-digit growth is the driver of our updated revenue guidance for the full year. Also, let me again here highlight the EBIT margin, which grew 13.5% and again, highlighting that this represents a stronger growth acceleration in the second half of the year as we communicated in November when we started the year. I'll let Henrik cover this in more detail. So overall, we believe it's a strong financial position, and we are continuing to invest a lot in both innovation when it comes to commercial and the R&D. Let's look at the business in more detail on the next slide, please, starting with Respiratory, where we posted really strong growth this quarter of 17.1%. And when we look at the rolling 12 months, this is -- this amounts to 11.5%. Single-use is in this segment becoming increasingly the standard of care as there's a lot of room to continue to grow with reusable still making up the majority of the procedures in this segment. Our growth was driven by our bronchoscope portfolio, so the aScope 4 and aScope 5, where customers are also with the aScope 5 still willing to pay for premium solutions. SureSight, as I mentioned in the beginning, is still an important growth driver, and that has both created a new adjacency for our business and also a synergistic market opportunity with our bronchoscope portfolio. So it contributes thereby both as an individual revenue stream and together with the full solutions of bronchoscopes. When we take a step back, we are very optimistic about the Respiratory portfolio in general. And I want to highlight when we look at these numbers that this is a great example of how we are proving that the playbook that we have and that we have used in recent years that works, and how we continue to drive new innovation that is differentiated in the market and thereby accelerating growth also in this segment, which was the first we entered, as most of you know now many years ago. So if we move to the next slide, this is the other part of our Endoscopy Solutions, so Urology, ENT & GI. And here, we delivered 15% growth. And when we look at the rolling 12 months, this amounts to 16.9% growth. As we mentioned in Q2, we were impacted a bit by some of the deliberate U.S. commercial adjustments that we did in April that positioned us well for long-term growth. And we continue to see momentum coming from those adjustments that we made. But when we look at where the growth is coming from, most of this is really driven by our existing portfolio of cystoscopes and ENT, and it's a continuation of the momentum that we have seen in the last quarters. When we then to comment on the 16.9% rolling growth, this is also the level that you should expect short term for the business. I believe it's quite solid growth, and we have good solutions in the pipeline on top of this that we will bring to market over the next 2 years that should both support and also strengthen this growth momentum that we see in this group. So let me move to the next page and to Anesthesia & Patient Monitoring. But before doing that, I think I should clarify that overall, the growth that we see in Endoscopy growth in the Endoscopy segment of 15-plus percent this year is something that we believe is very well on track to deliver over the strategy period, 15% to 20% as we set out to do last year and the 15-plus percent growth represents also what we communicated back in November. So now moving to A&PM, which now represents 36% of our overall revenue of the company. And we returned, as I mentioned, to positive growth of 1.3% (sic) [ 1.6% ]. And when we look at the rolling last 12 months, this is then now 1.3%. Patient Monitoring continues to show solid growth here, but Anesthesia is where we are seeing the annualization effect from some of the volumes that we lost on selected accounts as we communicated in Q2. It's important to say that we have not seen any further losses in customers in the recent quarter. The changes that we saw came on the back of 2 years of price increases where it takes some time to get that volume back that we lost. We still expect once this is normalized, that the business will follow the market growth of 3% to 5%. And overall, we believe that when you look at this segment, the growth should going forward be supported by the new MRI and CT compatible electrodes that we recently announced. So let's move to the next slide and look at the progress that we've had on this strategy. So there's a lot of this slide showing that we have and we are continuing to see a lot of momentum here 9 months into our ZOOM AHEAD strategy. And I'm very pleased with the execution and the speed that we see across the organization. I'm not going to go through all the details that you see on this slide, but let me just highlight a couple of things here. One is the SureSight, reiterating that we are very much on track and very excited about the progress we see on the launch of this and also the very strong positive customer feedback that we continue to get on this solution. Then also the second thing I want to highlight here is our EndoIntelligence, which we launched at our Capital Markets Day and where we are continuing to expand our capabilities in this field, and we are continuing also to advance our solution. And one recent validation of this is the best-in-class cybersecurity validation that we got on our monitors. And this is really crucial for the EndoIntelligence platform because, as some of you may recall, we are offering integration into the hospitals and into hospital systems as the only single-use player, something where we are seeing increasing momentum and where the cybersecurity validation is really crucial. But let's now take a step back and just remind everyone on the strategic priorities that we made with the strategy on the next page. Because when we launched the strategy, we called out Urology and Respiratory as the key focus areas. And why was that? That was basically because we see a very strong trend towards single-use solutions becoming the standard of care and that this is most profound in these 2 areas. We lead the single-use conversion and also our winning formula, as I alluded to earlier, is very much driven by innovation with the aim of differentiating and for us to provide the full solutions for our customers and continuing to deliver strong commercial execution. Let me just double-click on these 2 areas, starting with Respiratory on the next page before I hand over to Henrik. So Respiratory is, as I said, a clear example of how we are winning with the broadest portfolio with a 17.1% growth in Q3 and more to come. We saw competition a few years back, but came back with a full solution that addressed a lot of the different procedures in this segment. You see different parts of our solution on the left-hand side of this page. And I want to put specific attention to our SureSight solution that we just brought to market because it is a very nice adjacent new segment for us, but it's also where we see a lot of synergies with our bronchoscope portfolio. If we look at the middle and where we have tried to illustrate where is it really we see the growth coming from in this market. And the biggest growth driver, as you see on the top here is really the conversion from reusable platforms. Despite the Respiratory being a more mature market, we still continue to see this as a very strong and by far the strongest driver of growth. Then we are also gaining some market share that we were losing previously. In particular, this is a very U.S.-focused point. And then lastly, the new product launches with SureSight can expand the relevance of our procedures and open up for new areas of growth. So this is precisely the split in growth. This is -- sorry, it's not so easy to have a precise split, but this is really how we see some of the key contributors to growth that we want to highlight. And as we look ahead and which is what we have tried to illustrate on the right side of this slide, the next generation of solutions that we have in development will continue to support that we both increase our revenue with existing customers that we expand also the procedure relevance in the existing markets, and this is very much the ICU and OR as we have talked a lot about before. And then we are also being focused on driving new adoption in new markets where the OR suite, in particular, is an area that -- where there's still a lot of untapped potential. The innovation road map we have, we don't talk a lot about this for competitive reasons, but we do see exciting solutions in development that can strengthen our position in this area. So let me finish off my section here with Urology on the next page. Because Urology is, as you know, a market that consists of 2 clinical areas, cystoscopy and ureteroscopy. We stepped into cystoscopy as first movers in 2020, and we have had time to build a broader portfolio here. We continue to be market leaders and to gain market share here, which is very much driven by the structural conversion from reusable solutions with a strong momentum also for our premium solution aScope 5 system. For ureteroscopy, we entered this segment more recent, and we launched our first solution into a very competitive market where we were for the first time, not first movers. Therefore, we are still developing our portfolio in this segment. So again, here, as you see in the middle here, we have tried to illustrate also in how we see growth and where the growth is coming from. And it is, again, also the exceptionally strong conversion from reusable endoscopes, both in ureteroscopy and cystoscopy, validated by the key opinion leaders and also with an increasing entry of other players. Then we see the single-use market share being more stable in cystoscopy and compared to ureteroscopy, where we are gaining share, but from a low base and not at the speed that we were originally planning. Then most of our growth is coming here, as I mentioned before, from existing solutions. So that is very much our cystoscopes that is the main driver in Urology in a very fast-growing single-use market. So while we have the strong offering in cystoscopy performing really well, we will have the same approach in this segment as we -- as I talked about for Respiratory, and that is to continue to advance our solutions and our offering and the relevance for more procedures. In ureteroscopy, our strong focus is really to gain share, and we'll do that with our existing solution, but we're also looking to win by bringing new innovation into this segment within the next 2 years that should strengthen our offering in this segment. So before handing over to Henrik, maybe I should finish by summing up to say that how we see the market is really that single-use is becoming the standard of care and the trend towards single-use is moving fast. We are continuing to lead this. And what is really the most important growth driver is not so much the small market share shifts, but it's really the conversion from reusable where we see our Endoscopy Solutions growth still at 15-plus percent this year and again, confirming that we are well on track for a CAGR of 15% to 20% over our ZOOM AHEAD strategy period. So with this, I'll move to the next slide and hand over to Henrik to go through the financials.

Thank you, Britt. Thank you for the update. Good day, good morning to all. I'll now take you through the financial review for Q3. As usual, I'll start with revenue development, then cover regional performance, talk a bit more on margin in particular, cash flow and finally, the updated outlook, as Britt already referred to. So let's first have a look -- closer look at the reported revenue and organic growth on the next page. Looking at our overall growth performance, we delivered 10.3% organic growth, resulting now in a 12-month rolling revenue of organic growth of 9%. As Britt said, this was really driven by strong growth in Endoscopy with now a revenue share of 64% and continuing to increase as Endoscopy is outgrowing Anesthesia & Patient Monitoring. Respiratory within Endoscopy delivered a particular strong quarter with 17.1% organic growth for the quarter and accelerating 12-month rolling organic growth. While A&PM returned to positive growth for Q3 after a more challenging first half, it's still a modest growth expected for the rest of the year. The growth is still challenged with selected customers in U.S., where we're seeing volume declines. And that is still a full year effect that we expect to see across the year, while we are now also seeing positive momentum across the business in many other areas. And that also means that A&PM again, is back in positive volume growth. This change, though, is still the main driver behind our updated organic revenue growth outlook of around 10%. I'll come back to that when I review the outlook in more detail. Last but not least, FX continued to be a headwind in Q3 compared to Q2, where we continued to see a negative development in the U.S. dollar/DKK currency, which continue to be both impacting us negatively on top line, on gross margin and slightly on EBIT margin. Let's have a closer look at the regional performance on the next page. Overall, we continue to see solid growth across all regions. The strong growth in all regions is within Endoscopy Solutions. Growth in North America continued to be really solid, also Endoscopy Solutions, but still impacted by the lower growth, in particular in Anesthesia, on the nonexclusive contracts and the lower volume that I addressed before, and we also mentioned now Q2. Both EMEA and particular rest of world are on solid growth tracks, continuing to be driven by the really solid underlying Endoscopy growth in all markets. With that, let's have a closer look at margin and start with gross margin. So looking at gross margin, you continue to see a steady -- next page, please, operator. Thank you. Starting with gross margin, we continue to see a solid developing trend overall, where we are compared to last year, improving our gross margin by 60 basis points for the quarter specifically moving or ending at 59.5% compared to 58.9% for the same quarter the past -- the last year. Though for this quarter specifically, it is a lower level, and that is mainly driven by FX, by the continued FX development and the negative development I just referred to in the U.S. dollar/DKK currency. The underlying trend of the continuous positive development in gross margin and the drivers of those are really still unchanged, being: one, better output efficiency in our manufacturing sites around the world; continuing the journey of being more effective and scaling our footprint, both in China and Malaysia, but in particular, in Mexico; improved pricing governance across the board, but particular with high focus on A± and last but not least, a continuous positive driver being that the higher growth in Endoscopy with stronger underlying gross margin continues to drive a better mix -- product mix and therefore, a better gross margin. Let's move on to EBIT. For EBIT specifically, there's a number of things that are moving around, and therefore, I really want to make sure that we are clear in terms of how to look at the reported EBIT and also the many different adjustments that are moving back and forth. Reported EBIT was 13.5%, an improvement of 2.2 percentage points versus the same quarter of the last year. In our report, this was previously labeled as EBIT before special items, but we don't really have any special items in this financial year nor in the comparison year, we're just calling it reported EBIT. On the adjustments, to reach what we call in our presentation, adjusted EBIT, this is really what you could say, a like-for-like comparison from previous year. Unlike in Q1 and Q2, where we saw a positive effect from these adjustments, it's really a different adjustment here in Q2. The underlying building blocks are as follows. We still pay tariffs in the quarter, but these were lower than in Q1 and Q2, following the trend, as we said from the start, that the paid tariffs in the first half will be higher than the paid tariffs in the second half. And we still consider or expect this number to decrease further, ending basically at a run rate cost of around 1 percentage point negative effect for tariffs that we will carry over into the next financial year, something that we will also come back to. On refunds, we received slightly less than DKK 40 million back from the U.S. government on the reclaimed IEEPA tariffs. This is slightly less than DKK 40 million because there's also an FX adjustment and smaller transfer pricing adjustments. But as you can see in our interim report Note 4, this is really the difference between the balance that we communicated in Q2 and the balance that we're now communicating as still outstanding in Q3. In addition to that, after the closing of the quarter, we received additional DKK 85 million, which were not recognized in Q3, but will be recognized instead in quarter 4, one of the reasons why we are also now communicating a higher landing point of our EBIT margin for the full year in the upper range of our guidance of 12% to 14%. As the refunds were larger than the expenses in Q3, net impact on tariffs for this quarter, unlike previous quarters, was slightly positive. In addition to that, we also had a smaller impact from FX, as I also mentioned earlier, if you compare this quarter to the previous 2 quarters, particularly driven by the U.S. dollar/DKK development. Altogether, this means that the adjusted EBIT, as referred to here on the slide, landed at 12.5%. This is below quarter 1 and quarter 2 adjusted EBIT of 15.2% and 14.5%, respectively. We did indicate in our last quarter that we did expect quarter 3 to be a bit lower than quarter 4, and that's also part of what you're seeing here. And we are comfortable today reiterating that quarter 4 will be higher, both on refunds, partly driven by tariffs, but also on the underlying EBIT. Q3 specifically was impacted by a few small time costs, particularly the commercial expansion that we mentioned in our Q2, where we did do extra investments, particularly in the U.S. to expand our sales force, and there's also always a couple of ramp-up costs on those. This is part of the selling expense line. And secondly, we had a number of strategic projects that also were expensed in the admin line. And altogether, this contributed from -- to a slight step down in the adjusted EBIT margin from what we saw in Q1 and Q2, but we are comfortable that this will turn around for Q4. Looking specifically at Q4, the step-up in the adjusted EBIT margin will mainly be driven by 3 factors. First, as implicit in our underlying updated guidance, we still expect higher growth in Q4, and that will drive an overall better operating leverage. Secondly, we expect a better gross margin, partly because of the continued improvement of mix towards Endoscopy and partly because of geographical mix as we are expecting higher growth in U.S. Lastly, and the biggest driver of this will also be a lower OpEx ratio in the fourth quarter, particularly driven by operating leverage, as I mentioned, also with a higher growth, particularly in the lines of selling expenses and admin where we do expect to see higher leverage for quarter 4. So net-net, we are seeing what we see as a positive development. The quarter 3 is affected by a few onetime costs that are mainly impacting our admin and selling expenses. But overall, we are well on track. And with what we see for quarter 4 and the guidance where we're now expecting to land in the upper end of the 12% to 14%, we feel very comfortable about it. Last but not least, coming back to my point about tariffs, I also just want to reiterate that the tariff cost, the underlying tariff costs, are still developing as expected. And we will, we believe, end at a point where at the end of the year, we'll still be carrying around a negative 1 percentage point of impact before any tariff refunds as a negative impact we will also carry into next year. Exactly how we will end up accounting for the remaining outstanding refund claims is still an open question. We have another DKK 70 million that could either be paid as part of Q4, i.e., if they are paid to us before end of September or could be paid later in the year. We maintain the view that we are conservative on this and we will therefore not recognize any of the tariff -- outstanding tariff reclaims until they are ultimately paid to our accounts. With that, let me move on to cash flow. We continue to see a really strong cash flow driven by both and mainly a stronger operating leverage from our improved underlying EBITDA, but also with a positive development in net working capital. The underlying EBITDA is obviously also here helped by the stronger or the additional reclaims of tariffs. But overall, the main driver of this is really our operating leverage. That also means that we are reporting a net free cash flow for the quarter of DKK 154 million. And we continue, therefore, also to see a stronger and stronger cash conversion now for the quarter specifically at 48% and therefore, also reiterating that for the full year, we're still expecting a cash conversion above 40%. With that, on the last page, let me turn to outlook. So ultimately, we are today, as Britt also mentioned in her opening, updating our outlook as extension of our updated view of the A&PM expectations for the full year. We are therefore now guiding towards around 10% organic growth, which really reflects that the Anesthesia & Patient Monitoring is now expected to be very low single digit. Positive, but very low. We continue to see positive volume uptake in A&PM. And with that momentum we're seeing both in quarter 3 and also what we've seen since we closed the quarter, we feel comfortable that we can deliver on this. Very importantly, again, to highlight, as Britt also did in her closing, we are seeing really solid underlying growth in Endoscopy with a continuing strong momentum, and we're therefore still guiding for plus 15% organic growth in Endoscopy, which keeps us within the 15% to 20% organic growth CAGR throughout our ZOOM AHEAD period. On EBIT margin, we are maintaining our EBIT margin guidance of 12% to 14%. We still expect the uptick in quarter 4, as I just explained on the previous page. This will be supported by tariff reclaims, but also by a stronger underlying EBIT margin for the fourth quarter. Last but not least, as I also just mentioned, our cash conversion remain on track to deliver a 40% cash conversion for the full year in alignment with previous guidance and in alignment with our long-term target. With that, I want to hand it back to the operator for Q&A.

[Operator Instructions] The first question from Thyra Lee, UBS.

My first question is just on margins. So I really appreciate that color that you gave on the Q3-specific factors on the underlying margin or what you're calling adjusted EBIT now. Could you just provide a little more color on why exactly the things we see in Q3 would be one-off and not persist into Q4? For instance, surely investments in commercial expansion within the Urology, ENT & GI segment doesn't just drop off? And that was just one part of the bit that you highlighted there. And my second question, please, is one of our top incoming is what this all means for 2027. There's a lot for us to consider right now. Would it be possible for you to just speak through the key moving parts on both the top line and margins for next year, especially in light of the current inflationary context?

Thank you, Thyra. Thank you for your attention and for good questions. Perhaps I start with margin and then we can talk a little bit more about the longer term. I just want to caution today, of course, we are still within the current financial year. And only as part of Q4, we will start really talking about the guidance for next year. So the answers for the longer term will still a little bit await what we will come in -- we will comment on our Q4. On the margin, I think the point of one-offs are really to, I think, spell out 3 main things. First, you can say that for the quarter, the commercial investments, as you rightfully put, are investments mainly in people, as we also mentioned in our Q2. This is particularly U.S. focused on how we are more deliberate and you can say, focused in our ENT and Urology sales forces where we've added more people. The one-off cost element of this is that there were always some ramp-up where people are onboarded, trained, and before they hit the ground running on the sales teams, you don't really see the full operating leverage. And that will impact the first quarter in particular, when you're staffing up and spending cost on recruiting and onboarding. The second and equally big, if not bigger element, is that we had a couple of strategic projects. We continuously invest in expanding our understanding of customer patterns, of strategic opportunities and also long-term opportunities for us. And we have had a couple of projects that we were running just before summer where expenses for those were included in admin costs. These are not things that will reoccur. These are studies that are now over, and therefore, I'm also again referring to those as one-off. The last, which is, of course, a difficult one and not exactly a one-off is this question of FX where, again, if you compare quarter 3 to quarter 2, that continuous decline of the U.S. dollar/DKK is still impacting us negatively for the quarter alone, even though we, over time, have that natural hedge that I've talked about before, where we will see also a reduction in COGS, but with some delay. And therefore, there's still some timing effect in COGS for Q3 that is impacting us negative. If you look at the longer term, I guess, what we can say today is really what Britt already said. I think, one, we feel on a good track on Endoscopy, plus 15% growth for this year and within the long-term CAGR of 15% to 20%. On margin, I think the overall themes are the same. And I just want to reiterate again because that's also been a question on tariff, we are seeing the run rate cost still for next year being around that negative 1 percentage point before any tariff refunds going into next year. So I think that's as far as we'll go. There's still a lot of things we can see that we are executing on as planned on the operating leverage. And today, I think it's still a bit too early to talk about what would be potential inflationary topics for next year. Most of these are things we can manage and navigate mid- to long term. So I will postpone that more detailed answer to our Q4.

And maybe just a few comments on the revenue. And I've already said that, and again, we cannot be too specific. But if we look at what we see as the trend in Respiratory, I think, I mean, the growing momentum that we have from the broader portfolio, I think that's -- I mean, that's very much supporting our delivery on the strategic -- on our ZOOM AHEAD strategy, sorry, with a strong continued momentum expected in Respiratory. And then as we talked about Urology, ENT & GI, I mean we are also here continuing to lead the conversion to single-use. And feel very confident also around the level that we have seen when we look at the recent rolling 12 months and continuation of that and around that level. So I think that's as specific as we can be now. But we continue to be very focused on Endoscopy, and we are really on plan to continue to deliver strong growth across all segments here.

The next question from Martin Brenoe, Nordea.

I have 2, if I may. Actually, I would maybe just like to understand also the margin a little bit better. So I'll try to slice it and dice it a little bit differently. Maybe if you can just talk about the commercial investments that you have had in this quarter. Based on my math, and you can correct me if I'm wrong here, but it seems like a distribution ramp-up cost of around DKK 30 million from Q2 to Q3 when I take out all of the tariff FX impacts quarter-over-quarter. Can you maybe just elaborate a little bit on what that actually is going to be, sort of, what is that investment targeting? And how should we view sort of the step-up in distribution costs from here on? Is this sort of a front-loading of investments into next year? Or should we expect to see a gradual ramp-up of commercial investments during the next couple of quarters as well? Just to understand whether you front-loaded your investments a little bit here or whether this is something that is maybe more of a reaction to the increase in competition that you're seeing in the Urology segment?

Yes. So good question, Martin, and I can certainly go a little bit more deep into it. So obviously, you could say from one perspective, with the tariff reclaims and more money in the bank, we are looking at are there certain things we would do differently. But the first key answer is we have not front-loaded a massive cost. I think on the transfer of production, there are certain one-off costs and also some that land in the distribution line when you're transferring production lines. They have not been accelerated massively, but we're continuing to invest in the scale-up, and that's part of what you're seeing here. Except for that, and without going into the specifics of the math that you're highlighting here, the around DKK 30 million, I think the key point we want to make is we continue to invest in the commercial organization. We've tried to be quite clear when we do it. And in Q3, we specific -- sorry, Q2, we specifically called out the fact that we were investing in U.S. in that separation of the Urology and ENT sales force because we see so much opportunity for both. And now here in Q3, we have that basically settled. So therefore, we're not expecting a further gradual step-up in this cost line into Q4. That's more or less all run rate into the Q3 number you already see here. And I know this has been a debate we've had before when exactly are these materializing. But I think, therefore, the key statement is for Q4 alone, there's not an expected big step-up in commercial costs. Longer term, I do want to -- a key point I want to reiterate is we continuously look for growth investments, of course, and some of those have longer payback than others. And that's still something we are continuously evaluating when we look at the long-term picture. But for the short term and more specific for Q4, as I said also in my update on the underlying EBIT margin or the adjusted EBIT margin, we're actually expecting to see a higher level of leverage also on the commercial cost into Q4 given that we already made these investments and the costs were in Q3.

Just my just second question, please, would be on the Urology, ENT & GI. Britt, this is maybe a bit more to you in terms of the trajectory that we're seeing. This is a gradual slowdown that we've been seeing for many quarters now with a few bumps, you can say, during the last maybe 2 years or so. So what should be -- what should make the market and analysts and investors believe that we will see an inflection point in this slowing segment altogether? Is it product launches? And if that is the case, which product launches should we look for in which segment? Is it new markets that you're entering, reimbursements, tenders? Anything that can provide a little bit of comfort to investors and analysts would be super helpful to get in that segment.

Thank you for that question, Martin. And let me maybe take a step back to say, I mean, last year at the Capital Markets Day, where we talked about the market potential. And then you can say, has anything changed since what we communicated there. And I would say, I mean, the only main thing that has really changed from there is when we look at uretero, as I alluded to in my presentation, that we are not gaining market share as fast as we expected in that. And then you can say why is that? I think there are 2 things to this. One is the fact that it is a much more crowded market with many more players, and we have also talked about this before. And then the combination of that and that these sales cycles are longer because we have -- I mean, these procedures are more complex. But other than that, nothing has changed. Then if I answer your question of why is it you should believe that we will continue to grow here. We are right now, as I alluded to my presentation, seeing most of the growth coming from aScope 4 Cysto and aScope 4 RhinoLaryngo in this segment specifically. And these are both solutions that have been in the market for 6, 7 years. And we do have improved solution in development that we will actually bring to market that can also address a broader market and different procedures. And that is really back to, I mean, the playbook that I alluded to that this is when you look a couple of years out, what should make you comfortable that we will continue to have growth. At the same time, we are very focused on our solution and how we are differentiating on our solutions. So that's also where when we look at the full solution, the EndoIntelligence comes in, where we have the opportunity with technology to also improve how we are adding value to our customers. And this is where we are by far leading relative to all other players in the market. As I mentioned, we do have integration into hospital systems, which is significantly improving their workflow efficiency. We are the only company that has that. We are very far ahead also because we have very strong documentation on cybersecurity, and we are seeing the customers adopting that. And then we have some more groundbreaking solutions when it comes to EndoIntelligence in development that I'll not go too much into for competitive reasons. But I think that's all thinking around the solutions that we bring, moving from providing a single scope with aScope 4 Cysto and aScope 4 RhinoLaryngo to a broader solution offering is really what should drive the growth, and we are seeing some of that momentum now, and that's going to improve as we are bringing new solutions to market in the next couple of years in this segment. And then the last one in GI, from a lower base, we see continuously strong growth percentage-wise. And we are also seeing good momentum with the new approach we took in this segment with our aScope Gastro that we are getting momentum. We have been very clear about that we have not allocated a lot of commercial resources to this because we wanted to learn and see how is it that we can really in this being the by far, the biggest Endoscopy segment, how we can also drive the conversion in this segment as we have done in other segments. And I think we are getting much closer to, I mean, understanding what is our approach and what is it will take to also for the customers to gain the same efficiency improvements and quality in their work from our single-use solutions. So that's also why we are very confident on this segment. And then maybe finally on uretero, I mentioned in my presentation that we are also working on improved solution and a broader portfolio from what we -- from our aScope Uretero that we launched. So that's also where we believe that, that should clearly differentiate us in the market.

The next question from Anchal Verma, JPMorgan.

I have 2, please. One is just looking at your midterm targets. If we look at your EBIT margin target that you had released around a year ago, which was for around 20% margins by FY '28 and over 20% by FY '30. Looking at where we are right now, can you help us understand that bridge from, let's say, from around 12% this year and that's calculated from an underlying ex tariff refunds basis. How would that trajectory look? Are you still comfortable around those targets? And do you think there is any risk to those targets? And then the second one, again, on the midterm guidance was around Anesthesia & Patient Monitoring, you had upgraded that guidance to 3% to 5% top line growth. How are we thinking of that business longer term? And how do you believe volumes will develop? Again, are you comfortable with that range? And do you think there's any risk to the upper end of that guidance?

Thank you, Anchal, and great to have you back. Thank you for the questions. So let me start on margin. I think the first thing I want to remind us all is that when this 20% target was set actually originally back in ZOOM IN strategy and reiterated in our Capital Markets Day last year around this time, we also caveated that we will evaluate potential growth investments along the way and growth remains our first priority. That doesn't mean that I'm today changing the target, but I just want to remind us all that, that's been the balancing act all along. The key components of how we get from today to reaching that level in '27, '28 are the same. It is still a combination of gross margin and OpEx ratio, of which OpEx ratio will be the vast majority of that. And that's also why we keep talking about this operating leverage point and how we see this leveraging across our organization. Besides that, for today, Anchal, I don't want to go further in detail on exactly how this will pan out. I think with also where the focus has been in question so far, we will focus more on how we land today and how we show that gradual improvement in the EBIT margin with a continuous higher growth in EBIT than we see on the top line, what we are also expecting for this year, if you adjust for both tariffs in and out and FX, we will see a gradual improvement this year, and we expect to continue to be able to deliver on that. On the A&PM side, if I turn to that, I think also a good question. I think, obviously, this year, the growth trajectory looks very different. But I want to remind you, if you go back and look across last year and this year, we're still actually solidly within our growth guidance of 3% to 5%, clearly, a little bit lower than we have been on Anesthesia, but solidly still within the guidance if you consider the price increases we've done. And therefore, with what we know today and what we see and back to Britt's point, the new product also in particular for the Urology segment, we don't see any reason to change our view on the long-term growth trajectory for the A&PM segment or business area with a 3% to 5% CAGR growth across the period.

That's very clear. And just a quick follow-up on margins and input cost inflation. I appreciate you won't be able to share much thoughts into next year. But just trying to understand, do any of the contracts include pass-through pricing or inflation clauses?

So today, I cannot comment sort of on the specifics of all contracts. But typically, there is not a direct one-to-one pass-through. And I also just want to remind us all that some of the cost inflation that I know a number of other companies are talking about is still not really that impactful for us, neither on plastic resin or silver prices or the like. So net-net of the external factors, it's still FX that's by far the single biggest impact here. And with that, I'm also really saying, Anchal, that we have time sort of in our commercial model if we see a structural change in the underlying cost of a component or a raw material that we can go out and change our contracts commercially because in many of our contracts, we have annual reviews of pricing where we have a chance to do that. In the ones that are longer, then we typically manage and we can manage also with efficiencies in our operating setup. So net-net, cost inflation still is not a big theme internally in Ambu.

The next question from Yiwei Zhou, SEB.

It's Wei from SEB. I have 2 from my side. I do one at a time. Firstly, I noticed that you highlighted the ASC potential for nonrespiratory endoscopy portfolio. But to my knowledge, this is also a segment where the customers are more price sensitive. Is it fair to understand that you would be more willing to compromise your gross margin to pursue the growth? And what are the strategic priorities?

Yes. No, thank you for that question, Wei. And it is true that, I mean, we are looking at expansion into different segments and very much also are close to how the market is converting where we are seeing that the market is converting with more and more procedures being done in the ASCs, the ambulatory centers. So therefore, I mean, that's a place that we are also playing. And we are playing a bit with our pricing in terms of some of these segments, but also with a very clear price flow. And this is also where I want to highlight that this is necessary to play in this segment, as you say. But when we look at our total pricing and how our -- how we look, we are still priced at a significant premium to our other single-use players and also that some of these selected customers. I mean, we evaluate carefully how we use the price then to get volume. And this is worth noticing that when we look to the ASCs, we are very focused on where we see the high volumes and -- but we do see back to the trend that I mentioned that they are -- given more procedures are moving there, they are also looking for a more comprehensive portfolio where our aScope 5 Cysto in some cases, becomes attractive for them. And that's a different price point. So it's very important to highlight that on the pricing, we are very focused on avoiding dilution, but more looking at keeping the price at a competitive level where we are, again, at a significant premium to the other players in the market.

Okay. That was clear. Then my next question on cystoscope specifically. I know you have given some price concession due to the competition. Is it possible to quantify the gross margin impact here in Q3?

Thank you, Wei. So it is correct that we, as Britt just said, in selected markets, selected accounts, now we've talked about ASCs are doing sort of strategic pricing, i.e., slightly lower prices at a premium to competition, but still lower versus where we came from. We're not going to quantify exactly what that means on gross margin. I think, again, balancing back versus FX. FX is a bigger impact on this than these underlying trends. So I think if you look at the overall picture, this is certainly something we are very focused on and extremely focused on in terms of the investments we're making in innovation and commercial execution to continue to differentiate ourselves. But we're not at the stage where we're seeing a wider price erosion at a bigger scale. We are more now focused on how do we continue to drive that differentiation also forward also for the segment. And then mindful that the segment splits, which we also discussed in the previous session, I think in Q2, you asked the question, Wei, where, what is the split between hospital and ASC or in Europe outpatient? Where, of course, when you go more in the outpatient or ASC segment, it is at a lower gross margin level than what you see in hospital, but not something that has a big effect at the group level.

Okay. If I may follow up on the gross margin. So if I understand correctly, you are expecting an improvement here in Q4. Could you name what will be the main drivers here?

Yes, of course. So it is correct. We are expecting an improvement. And as I said in my update on the EBIT margin, it is really a combination of the factors that we've talked about before. I think first one is that we are expecting higher growth overall and growth here also is a scale factor for the indirect production cost, so the fixed cost under gross margin for our factories. Higher growth in Endoscopy, which again is a net better gross margin, and that will also explicitly be the case for Q4. And then, of course, I'm not referring to FX, but because we don't know where that will land exactly that is the one open caveat, which could push us one way or the other. But really, those 2 factors being the same as we've talked about before, are really what we expect to also see materialize in Q4 and therefore, with a higher gross margin as a net.

The next question from Delphine Le Louet, Bernstein.

Two questions on my side, please. One, dealing with the commercial and the commercial approach. I was willing to know what is new and specifically into the U.S. in your commercial approach that you've been putting in place over the past 6 months that will start to be visible in the next semester? And the second question, because there is a lot of question mark here regarding this, let's say, bucket of investment cycle, but just slash CapEx. So just willing to know how should we read the breakup of that envelope coming up in between the manufacturing and the commercial next year?

Okay. I'll maybe start with your first question there, Delphine. Thank you for that. And let Henrik comment on the CapEx and breakup. When it comes to the commercial approach that we have taken, what we communicated also last quarter and what we did starting from April was that we -- I mean, we did an adjustment of the commercial setup in U.S., basically as a result of how, I mean, the customers have been changing and also where the decision-making is taken. So we have made a much more structure that is centered around the customers itself and the hospitals, so we can leverage much more our portfolio across the different parts of the hospital. And then we have also doubled down on the potential that we have to see how is it that we have a setup where we can leverage that at the same time as going much deeper and being more specific on the different specialties that we are in where we see momentum. So that has really been the driver of setting that up. And I will say when we spoke in early May in connection with our Q2, this was relatively new. I will say now a couple of months later, this has actually gone very well. And we -- I mean, we see we have settled in adjusting to this very fast, and we are continuing, of course, to practice on how we do that. But it's very much that, I mean, focusing on the decision-makers where we are strengthening our approach and not just the clinicians as a result of how the market is moving. And then we talked about also other outpatient settings where patients are increasingly being treated to make sure that we have a setup that addresses that.

Yes. So building on that, I just want to -- and thank you for the good questions, as always, Delphine. I just want to reiterate what I said also before in a positive sense, we are able to attract really good commercial talent also in U.S. And therefore, we have actually had a lot of people, good people, coming on board. That's also some of the one-off onboarding costs that I referred to earlier in terms of commercial investments that obviously gives us the -- puts us in a position to then also accelerate our efforts into the market, as Britt explained. In terms of the investments rest of year and into next year, I just want to make sure I split it in 2. So obviously, we're doing investments that are impacting our OpEx and investments that are impacting our CapEx. On the OpEx side, this is mainly investing in the commercial field force, where, of course, we are -- the run rate level we are seeing now here in Q3 and which will be carried into Q4, if you exclude these one-offs that I have talked about, it's really also a run rate level we are expecting to carry into next year. A lot of these commercial field force investments have been a high focus of ours over the last 18 months. And in most countries, we are really now more doing smaller adjustments, but major adjustments. And therefore, we will continue to do those investments, but we are into a large now at a place where we're also more focused on making sure we scale the investments we've done at the right level in the right pace. Except for that, if we then turn on the CapEx side, which I also heard you ask about, I think we are still investing obviously significant in innovation. You will also see that our capitalization rate have gone up a little bit for the quarter to be very detailed, but this is more a matter of the maturity of our portfolio and the total level of spend we are continuing to put into innovation, and that's still increasing at a solid but also high pace because we see significant opportunity. And as Britt said, with several product launches coming up, that's an area we're investing in and an area where we're also already investing and will continue to invest in the production ramp-up needed for those new production lines. That does not mean new factories. It means products maturing the production lines and being ready for the commercial launches that will come at the scale that they are required. And those investments are also still being made and something that will carry into next year. We have the overall capacity in terms of physical space to manage these investments, but it still requires equipment, training. And obviously, we're looking also at automatization as we scale our manufacturing sites to a larger extent and with that also looking for better output efficiency.

And just a quick follow-up on this one. Where are we in terms of the margin difference, gross margin difference in between Mexico and Malaysia?

So we're still at a place where you could say if you look at the landed cost of a product, excluding all tariffs, today, there is 10% tariff on products being imported from Malaysia to U.S. But even excluding that, on a landing margin, i.e., if you improve production cost and the distribution cost to the customer, it's the same level for Mexico and Malaysia.

This was the last question. I would like to turn the conference back over to Britt Meelby for any closing remarks. Thank you.

Thank you for that, operator, and thank you to everyone for listening in on today's call, and thanks, in particular, also for the very good questions.