• Fine 7% Group organic growth which could have been better
• No news on CMS reimbursement, Guidance adds $4m one-off costs
• Consensus a few % down on restructuring costs, growth story intact

Q1 in numbers

Embla reported fine 7% Group organic growth (Prosthetics & Neuro 10%, Braces & Support 1%), for Group sales of USD 199.9m, some 1-2% above expectations. Gross margin came in 150-170bp below expectations, but was inline when adjusting for additional $3m in cost reduction inititatives undertaken late in Q1. EBITDA pre-items came in at $33m which was 8% below ABGSC but 3% above Company collected Consensus. Net Profit came to $8.3m, 23-43% below expectations, but solid vs Consensus when adjusting for the extra cost initiatives.

Key focus points

1) Divisions Prosthetics & Neuro grew 10% organically. Bionics constituing 21% of group sales, down from 24% in Q4'23 where Embla managed 9% organic growth in this division. We would expect growth in Bionics to pick-up through 2024 as new product launches should add to growth. Growth in Braces & Support was held back by the cyber-attack on Change Healthcare in February. 2) Guidance Embla maintains underlying guidance, but adds $3m in costs under "Special items". With 7% organic growth generated in Q1, driven by the "right" business ie Prosthetics & Neuro does the Q1 appear to support Embla's growth story ann trajectory. 3) In January did CMS draft positive proposal around K2/K3 reimbursement, as expected has there sofar been no news yet on the process.

Structural growth story unchanged

Embla delivered solid 7% Q1 organic growth which could have been even stronger as Bionics appears to have had a below-average quarter and as Change Healthcare cyberattack may have had a materially negative growth impact. The added $3m in Special Items costs reaffirms our impression of a business which has yet to optimize its long term structural cost & margin set-up. We expect Consensus to make minor negative estimate changes. We see t