Vitrolife : App 3 Annual report

Annual and Sustainability Report 2023

Contents

Our mission is to be the leading global partner in reproductive health, striving for better treatment outcomes for patients

Annual and Sustainability Report 2023 Vitrolife Group

2

Contents

4 The year in summary

1. Message from the Chairman
2. CEO comment

1. This is the Vitrolife Group

1. The future of IVF

1. The reproductive-health market

1. Updated corporate strategy

36 Own the platform connecting products and services

1. Innovate to expand leadership

1. Accelerate growth in key markets

1. Optimise go-to-market model

1. Drive operational excellence

48 Ensure sustainability in everything we do

Contents

Corporate Governance	85	Changes in equity
57	Board of Directors	86	Cash flow statements
59	Corporate governance report	87	Notes to the financial statements
66	Executive management	120	Auditors' report
68	Management Report	126	Alternative performance measures
Financial statements	Sustainability notes
75	Contents financial statements	129	Sustainability statements

76 Five-year summary, Group

77	Vitrolife AB (publ) share	Other information
80	The Group's key figures	155	Glossary
81	Income statements with comments	156	Shareholder information

83 Statements of financial position with comments

The Statutory Annual Report, which contains the Management Report and Financial reports, is found on pages 68-119. The Sustainability Report is found on pages 129-154. The Sustainability Report also constitutes the statutory sustainability report for Vitrolife AB under the Swedish Annual Accounts Act. The cross-references to the various sustainability reporting frameworks that Vitrolife AB applies are on page 154. This document is the original; a corresponding version of the Annual and Sustainability Report exists in Swedish. In all matters of interpretation of information, views or opinions, the Swedish version takes precedence. The Vitrolife Group refers to Vitrolife AB (publ) and all its subsidiaries.

Annual and Sustainability Report 2023 Vitrolife Group

Contents 3

Highlights

Positioned for success

Contents

New CEO Bronwyn Brophy

Read more on page 7.

The future of IVF

Read more on page 19.

Updated corporate strategy and financial targets

Read more on page 31.

Focus on innovation

Read more on page 38.

Mikaela and Lena's journey to parenthood

Read more on page 29.

Committed to Science-Based Targets

Read more on page 54.

Annual and Sustainability Report 2023 Vitrolife Group

The year in summary 4

2023 financial results

Net sales

Net sales by business area

Contents

Key ratios

3,512 MSEK 

EBITDA

1,136 MSEK

EBITDA margin

32.3 %

SEK millions

Consumables (1,528)

Technologies (640)

Genetic Services (1,344)

SEK millions*	2023	2022
Net sales	3,512	3,234
Gross margin, %	56.3	55.0
Adjusted gross margin1, %	58.6	57.4
Operating income before	1,136	1,050
depreciation and amortisation EBITDA
Operating margin before	32.3	32.5
depreciation and amortisation EBITDA %
Net income	-3,851	394
Net debt / Rolling 12 month EBITDA	1.0	1.5
(excl IFRS 16)
Earnings per share2, SEK	-28.44	2.91
Share price on closing date, SEK	194.70	186.20

Net sales and EBITDA

SEK millions

Net sales

EBITDA

Net sales by market region

SEK millions

APAC

Americas

EMEA

Market cap at closing date	26,372	25,220
Sales growth
Organic growth in local currency, %	4	10
Acquired growth, %	-	65
Currency effects, %	4	18
Total growth, %	9	92

Throughout the annual report, the corresponding value for the previous year is stated in parentheses, unless otherwise stated.

* Unless otherwise indicated.

1. Gross margin excluding amortisation of acquisition-related intangible assets.
2. Before and after dilution.

Annual and Sustainability Report 2023 Vitrolife Group

The year in summary 5

Contents

Message from the Chairman

Dear Shareholders,

As we reflect on the past year, we find ourselves at the dawn of an exciting new chapter for the Vitrolife Group. By combining the knowledge, product portfolios and market reach of our prominent brands in the fields of IVF medical devices and reproductive genetic testing, we have successfully laid the groundwork for the implementation of our new corporate strategy.

In addition to our continuous efforts to integrate and strengthen our capabilities in the reproductive-health sector, this year marked a significant change in leadership. The Board of Directors has diligently overseen this transi- tion, ensuring a smooth and effective hand- over of responsibilities.

I am delighted to extend my warmest welcome to Bronwyn Brophy, who has joined us with decades of experience in the medtech industry. Her arrival has brought fresh perspectives and renewed energy to our journey towards success. Bronwyn has already demonstrated her expertise by articulating a revitalised corporate strategy, mission and vision, which have garnered unanimous support within the Group. I want to extend my best wishes and look forward to seeing all that we will achieve under her capable leadership.

I would also like to extend my heartfelt gratitude to all colleagues whose work and dedication is enabling us to continue making an impact on fertility clinics and their patients, worldwide. The newly revised corporate values of the Vitrolife Group stand as a testament to

the dedication and alignment of our global teams into one Group.

Alongside our new values, a refocused mission and vision statement will further energise and inspire our efforts towards a common goal.

This commitment is deeply rooted in our determination to make a positive difference in the lives of our customers and patients. We extend this resolve to all our stakeholders through our comprehensive sustainability strategy, which the Board oversees.

As we look ahead, the Group is exceptionally well-positioned to capitalise on the structural tailwinds inherent in the reproductive-health industry, further solidifying our role as the leading partner to IVF clinics. I have full confidence that our new corporate strategy

will not only strengthen our current standing but also enable us to seize new opportunities and expand our market horizons, ensuring sustainable and profitable growth in the long term. We look forward to continuing this successful journey together.

Jón Sigurdsson,

Chairman of the Board

Annual and Sustainability Report 2023 Vitrolife Group

Message from the Chairman 6

Contents

Positioned for success

In 2023, the Vitrolife Group focussed on defining a new corporate strategy to strengthen our market position, capitalise on growth opportunities in the reproductive-health market and to drive long term, sustainable, profitable growth.

CEO comment

I joined the company as CEO in August and during my initial months at the Vitrolife Group, I travelled extensively, meeting colleagues, customers, investors, and other important stakeholders around the world. What immediately struck me was the dedication and passion of the people working in reproductive health and their commitment to support so many people to fulfil their dream of having a healthy baby.

However, with rising infertility prevalence, combined with relatively low success rates following IVF treatment and restrictions to care in many countries around the world we still have a long way to go. The opportunity to make a positive impact is immense and in the complex ecosystem that is reproductive health it is important that all stakeholders, including physicians, clinics, payors, governments, patient advocacy groups and the companies'

Annual and Sustainability Report 2023 Vitrolife Group

CEO comment 7

supplying products and services work together to improve both outcomes and access for patients.

We have identified several significant market trends which pose both opportunities and challenges for the Vitrolife Group in the coming years. However, the breadth of our portfolio and extensive geographic presence means that we are uniquely positioned to navigate both the challenges and opportunities ahead. We also have a robust R & D pipeline which will help to bring greater automation to the clinic workflow, this will be critical to support the growing number of clinic chains to scale and expand capacity.

During the first six months of my tenure, we focussed on defining our corporate strategy and building a high-performance culture. More recently we have been working on optimising our organisational structure to better serve our customers and patients. In parallel we are identifying key talents that will support us on our transformational journey to become the global leading partner in reproductive health. Driving our operational excellence program will

be core to funding our increased investments in innovation and expansion in key markets like the U.S. and China.

2023: continued growth with margin expansions

We increased revenues to SEK 3,512 (3,234) million for the full year, an increase of 10% in SEK and 5% in local currencies.

Sales in EMEA increased 6% in local currencies. We continue to grow our share in media and despite the relatively higher penetration of Embryoscope across the region we delivered robust growth on both capital equipment and the consumables and services revenue on time lapse. Genetic Services growth was overall in line with the market.

Sales in Americas decreased by 3%, local currencies and excluding discontinued business* due to headwinds in our Genetic Services business. This as a result of a significant decline in sales of our Endometrium Receptivity Analysis (ERA) test combined with a loss of sales due to a large customer insourcing their basic PGT-A testing at the start of the year.

Adjusting for these two factors the other tests in the portfolio continued to grow above the market rate. Our teams have been working intensively to ensure that the ERA test protocol is understood and adhered to by both clinicians and patients. We have also grown our PGT-A business with other clinics thus mitigating the impact of the large customer loss earlier in the year.

We had strong growth in APAC of 16% largely driven by China where we continue to perform very strongly, developing the market and taking share from competitors. Our penetration of Embryoscope is in fact accelerating and we have taken share on media. Our Genetic Services business continues to grow well above industry norms within our key markets in APAC.

Finally, we increased our gross margin to 56.9% (54.2), driven by product and market mix and progress in our operational excellence efforts. We also delivered a strong EBITDA margin of 32.3%. We are committed to our long-term financial objectives, returning the company to double digit growth in the coming years and expanding EBITDA.

Contents

"Driving our operational excellence program will be core to funding our increased investments in innovation and expan­ sion in key market."

* Discontinued business refers to Covid testing and GPDx China.

Annual and Sustainability Report 2023 Vitrolife Group

CEO comment 8

Our dedication to continually improving customer support was reflected in a five-point increase in our Net Promoter Score (NPS). It is great to get this positive feedback from our customers as a result of the various investments we have made in ensuring efficient delivery of products and services, developing digital solutions to enhance customer inter­ actions, and collaborating on best-in-class training programmes. I would like to sincerely thank all of customers for their support in 2023 and we commit to doing even better

in 2024.

The customer and quality focus are also part of our sustainability strategy, which we continued to implement. Notably, in 2023, under my leadership, we have committed to set near-termcompany-wide emissions reduction targets in line with climate science with the Science-Based Targets Initiative.

Building the right team and values

The foundation of our success lies in our people, and I am tremendously grateful to work alongside so many talented individuals possessing deep clinical and industry knowledge who inspire me every day.

We continue to identify and develop key talent across the company and provide them with opportunities to grow and develop their careers while at the same time recruiting best industry talent to compliment in areas where we require more specialist expertise.

Talent is important but equally important is a healthy corporate culture based on a set of values that define the essence of the Vitrolife Group and the values that will be required to be successful in the future. Our company is synonymous with quality and integrity however we also need to be the leading innovators in the industry if we are to fulfil our mission of becoming the leading global partner in reproductive health. Teamwork and collaboration need to be at the heart of everything we do, the whole is always greater than the sum of the parts! Therefore, following extensive consultation and dialogue with our colleagues, customers, and our board we defined four core Vitrolife Group values: integrity, quality, innovation, and collaboration. These values signify our dedication to excellence, pursuit of perpetual innovation, commitment to team- work and adherence to ethical practices.

I am honoured and humbled to lead the Vitrolife Group team on the journey ahead and I am confident that by staying focussed on executing on the five key pillars of our strat- egy: Own the platform connecting products and services, innovate to expand leadership, accelerate growth in key markets, optimise our go to market model and drive operational excellence we can and will become the global leader in reproductive health. Our ambition is to become a more global company and truly leverage one of the core and unique strengths of the Vitrolife Group which is to serve different standards of care across the world through a combination of genetic testing and Embryoscope® time lapse technology, with high quality consumable products in every clinic around the world.

Bronwyn Brophy O´Connor

CEO

Contents

"Talent is important but equally important is a healthy corporate culture based on a set of values that define the essence of the Vitrolife Group."

Our values

Innovation		Quality

Integrity		Collaboration

Annual and Sustainability Report 2023 Vitrolife Group

CEO comment 9

Contents

This is the Vitrolife Group

Excellence in reproductive health

Annual and Sustainability Report 2023 Vitrolife Group

This is the Vitrolife Group 10