BICO Group AB

STO:BICO

Earnings Call Analysis

BICO Posts Modest Growth Amid Challenges

In a tough market, BICO navigated with a slight 0.3% organic growth and EBITDA margins just below target levels, reporting 11.5% for standard and 5.1% for adjusted figures. Despite this, the company managed to bolster its cash reserves substantially, helped by a large property divestment. Significant improvements were seen in net working capital which decreased from 32% to 21% of total sales thanks to better collections and inventory management, resulting in a SEK 195 million reduction. The Bioprinting business faced an 18.2% drop in organic growth, yet the Biosciences and Bioautomation units performed more resiliently with 9.9% and a reduced 12.7% growth, respectively. Ahead of 2024, BICO is zeroing in on operational efficiency, commercial acumen, strategic portfolio review, and nurturing a high-performance culture.

Fourth Quarter Financial Summary

BICO Group ended the fourth quarter with a mix of developments. Sales declined by 4.4% to SEK 636.6 million compared to the same quarter last year, impacted by lowered demand from academia, diagnostics, and biotech segments. Despite this, the company secured an adjusted EBITDA of SEK 86.1 million, maintaining a robust margin of 13.5%. Notably, the quarter included the divestiture of Ginolis and a substantial goodwill impairment leading to a net loss of SEK 877 million.

Annual Performance and Cost Control Measures

Yearly sales reached SEK 2,249.9 million with an organic growth of 5.8%. Adjusted EBITDA rose significantly to SEK 217.7 million from SEK 126.2 million in the previous year, reflecting the company's focus on cost savings and operational efficiency. Goodwill write-downs totaled SEK 1,350 million for the year, contributing to a net annual loss of SEK 1,698 million.

Cash Flow and Operational Improvements

Operational cash flow saw a vast improvement with SEK 178.4 million in 2023, a turnaround from negative SEK 269.4 million in 2022. Investments in product development were managed prudently with SEK 15 million in intangible CapEx. Furthermore, BICO strengthened its cash reserves to SEK 861 million after selling a property in Berlin.

Strategic and Business Area Highlights

BICO experienced varying performance across its business areas. The Bioprinting units faced an 18.2% decrease in sales with adjusted EBITDA of SEK 9.2 million due to reduced academia segment sales. Bioautomation's sales contracted by 12.7% but saw improved profitability excluding the divested Ginolis. In contrast, the Biosciences arm enjoyed a 9.9% growth in sales and a substantial adjusted EBITDA of SEK 59.1 million, benefiting from lab automation projects and internal rightsizing efforts.

Financial Goals and Working Capital Efficiency

BICO fell short of its organic growth target, realizing just 0.3% growth in constant currency. However, there was a marked improvement in net debt ratios due to strong Q4 cash flow, aligning with mid-term financial targets. Additionally, the company decreased net working capital from SEK 670 million to SEK 475 million through better receivables management and inventory control, underscoring its commitment to operational efficiency.

Future Strategy and Market Outlook

Looking ahead, BICO is focusing on commercial excellence, strategic reviews, investing in people and culture, and continuing operational excellence initiatives. They anticipate the challenging market conditions of 2023 to persist into 2024, with a potential upswing in the latter half of the year. The company aims to leverage its position in lab automation, amid wider industry trends towards increased CapEx in this area, to enhance development speed for clients like Eli Lilly and AstraZeneca.

Earnings Call Transcript 2023-Q4

[Operator]

Welcome to BICO Q4 2023 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Maria Forss; and CFO, Jacob Thordenberg. Please go ahead.

[Maria Forss, executive]

Hello, and welcome, everyone, to BICO's Earnings Call for our quarter 4 report for 2023. We released our interim report earlier today at 7:00 a.m. CET, and my name is Maria Forss, and I'm BICO's CEO and President since November 2023. This is my first call for BICO and together with our CFO, Jacob Thordenberg, I will guide you through our financial performance and shed some light on our strategic priorities for BICO moving forward.

Let's move on to the agenda slide. Our agenda for today is divided into 4 sections before the Q&A. We will give you a summary of the quarter, the interim financial performance of quarter 4 and of the full year 2023, as well as our performance per business area. We will also touch upon BICO's strategic priorities. After the presentation, we will move to a Q&A where you can participate and ask questions. The operator will be back with further instructions.

BICO released preliminary quarter 4 and full year 2023 figures earlier this month on February 14, together with information about the goodwill impairment, which amounted to SEK 582 million for the company's SCIENION, Visikol and Nanoscribe. Jacob will elaborate a bit more on this subject later on in the presentation.

Sales in quarter 4 amounted to SEK 636.6 million, a decline of 4.4% compared to a very strong quarter 4 of 2022. This also meant that the positive seasonal effect was weaker compared to the corresponding quarter last year. This can primarily be explained by a decline in sales from Academia, Diagnostics, and Biotech segments, and by a more diverse product mix. It was pleasing to see that we delivered an adjusted EBITDA which amounted to SEK 86.1 million and a double-digit margin of 13.5%.

We also divested Ginolis via management buyout in November 2023. And the rationale behind this was that Ginolis didn't managed to transition fast enough to mitigate the post-pandemic downturn. Due to the divestment, Ginolis has been classified as discontinued operations in the financial reporting. And consequently, all the numbers referred to continued operations, except for cash flow numbers, which include Ginolis as well.

We're also very proud that Biosero signed the group's largest project to date worth of USD 28 million in December. This project consists of delivering lab automation solutions to a global pharma customer.

I will now hand over to Jacob on the section about our financial performance.

[Jacob Thordenberg, executive]

Thank you, Maria. I will summarize both Q4 as well as the full year 2023. As Maria mentioned on her first slide, we delivered sales of SEK 636.6 million with a decline in organic sales of negative 4.4% and negative 6.1% in constant currency. Adjusted EBITDA amounted to SEK 86.1 million, and EBITDA was SEK 95.1 million, thanks to healthy sales levels from Biosero's lab automation projects as well as an effect of rightsizing and cost control.

The gross margin for the quarter amounted to 70.2%, which is in line with the corresponding quarter last year. The net loss for the quarter amounted to negative SEK 877 million, whereof SEK 582 million related to the goodwill impairment.

And if we deep-dive into our sales for the quarter, you can see that the sales have increased over the year and sales for Q4 amounted to SEK 636.6 million, which corresponds to a negative organic growth of 4.4%, as mentioned on the previous slide. This meant that the positive seasonal effect was weaker compared with Q4 2022. This can primarily be explained by a decline in sales in the Academia, Diagnostics, and Biotech segments and a different product mix.

We can conclude 2 main reasons for the decline in sales, which also hampered our industry peers. Firstly, weaker sales than expected from some of our instrument-oriented companies, mainly attributable to reduced or frozen grants within Academia & Research in both EU and U.S. Secondly, we saw a weaker demand from the Diagnostic industry, which resulted in hampered sales in Bioautomation compared to Q4 2022. On the positive end, we saw an increased demand from Pharma customers and for Biosero's lab automation solutions.

And if we move on to adjusted EBITDA. Adjusted EBITDA amounted to SEK 86.1 million, corresponding to a margin of 13.5%. Compared with Q4 2022, the increase in margin was mainly attributable to rightsizing and cost control as well as the healthy sales levels in Biosero.

During the year, we have worked with initiatives related to Operational Excellence that targets lower cost, both on a short-term and long-term basis. In 2023, this translated into substantially lower personnel costs as well as cost cuts at BICO Group. Please also note that SEK 12 million was less capitalized in Q4 2023 compared to Q3, explaining the decrease in margin between the quarters. That was Q4 2023.

Let's move on to full year 2023. For the full year 2023, we delivered sales of SEK 2,249.9 million, which corresponds to an organic growth of 5.8% and 0.3% in constant currency. Adjusted EBITDA amounted to SEK 217.7 million and EBITDA was SEK 360.4 million, thanks to sales growth, but foremost, our diligent focused on rightsizing and constant control during the year. The gross margin for the year amounted to 70.1%, which is in the same span as the previous year. The net loss for the quarter amounted to negative SEK 1,698 million, which mainly drives to the goodwill write-downs in Q2 and Q4 2023. The goodwill write-downs amounted to SEK 1,350 million.

On the next slide, this shows the progress being made during the year, divided into total sales, adjusted EBITDA and operational cash flow. First, let me comment on sales, which shows a total increase of 6.1%. Adjusting for FX, sales were, however, flat, but in a very tough post-pandemic market where BICO, in comparison to peers, has performed rather well. This was primarily related to increased demand during the second half of 2023 for Biosero and the project-based business and in addition to some of the group companies in Bioprinting and Biosciences delivering slightly above expectations on a full year basis.

For adjusted EBITDA, I want to mention substantial improvements despite flat sales due to significant cost savings, resulting in adjusted EBITDA increasing to SEK 217.7 million from SEK 126.2 million in 2022.

In terms of operating cash flow during the year, we have made significant improvements, mainly driven by improved profitability and net working capital improvements. As can be observed in the table, we delivered SEK 178.4 million in 2023, which is SEK 447.8 million higher than in 2022 with negative SEK 269.4 million in operational cash flow. As Maria mentioned in the beginning of the call, we communicated goodwill write-downs on February 14 of SEK 582 million, which are noncash flow affecting one-off items affecting EBIT in Q4.

I will now give you the background to these write-downs starting off with SCIENION. SCIENION's performance has, during the year, been characterized by weak financial development attributable to weaker demand from the diagnostics industry. This would lead to a slower growth pace than previously forecasted, which in turn impacts the goodwill value. We have made major organizational changes and rightsizing during 2023 to mitigate the effects from the weaker demand.

On Nanoscribe, it has not been delivering according to the high expectations set in 2021 when the company was acquired. This has resulted in lower growth estimates which has impacted the goodwill value.

Visikol has developed weaker than anticipated over the last quarter. A decision has been made to integrate Visikol into MatTek since we have concluded that Visikol has better opportunities to reach profitability as an integrated part of MatTek. Due to the integration, Visikol's offering will be smaller and more focused on profitability. Given this, future projections have been lowered, resulting in a need for a goodwill impairment.

And if we move on to the next slide, I will comment on the cash flow. Improving cash flow and working capital have been a priority during 2023. And cash flow from operating activities for Q4 amounted to SEK 162 million. This includes a positive effect from a net decrease of working capital of total SEK 64 million. This effect comprised of an increase by SEK 91 million in operating receivables and a decrease of inventories by SEK 23 million and an increase by SEK 132 million in operating liabilities.

Investments in tangible CapEx amounted to SEK 9 million in Q4. Investments in intangible CapEx, mainly product development, amounted to SEK 15 million. As previously mentioned, this level was lower than in Q3 2023, which is related to product launches in early Q4, reducing the level of capitalization in the quarter.

Earn-out payments amounted to SEK 20 million in the quarter. Estimated remaining earn-out payments amount to SEK 49 million. Total cash flow during Q4 amounted to SEK 307 million, of which SEK 244 million was related to the divestment of the building in Berlin, which was completed during Q4. This improved total cash reserves to SEK 861 million for December 31, 2023.

Given the still somewhat weak market sentiment, we believe it's for now beneficial for the group to have a strong cash reserve. This position is something that we continuously evaluate.

On this slide, I will further elaborate on the net working capital improvements during 2023. Please note that all net working capital numbers on this slide are excluding Ginolis. Between Q4 2022 and Q4 2023, net working capital has decreased from SEK 670 million to SEK 475 million. And the main drivers for this development includes accounts receivables, which improved from SEK 665 million to SEK 520 million, which is an improvement by SEK 145 million due to more robust processes, including better collection payment process and group guidance.

Inventories improved by SEK 55 million. This is due to more stringent processes and agreements in place, which has stopped further increases in 2023 and inventories are expected to slowly show decreasing effects throughout 2024. Working capital liabilities increased by SEK 56 million, primarily driven by the large Biosero order. All in all, total improvements amounted to SEK 195 million or a decrease from 32% to 21% of net working capital in relation to total sales -- total 2023 sales.

We have reached my final slide in this section. Our financial targets were introduced in November 2022, and they are valid on midterm basis. For our growth target, we achieved 0.3% organic growth in constant currency. The outcome is below target, however, expected given the challenging market environment during 2023. If we move on to our margin target, BICO achieved 11.5% for reported EBITDA and 5.1% for adjusted EBITDA. The outcome is slightly below target if adjusted for earn-out adjustments, but an improvement from previous year.

The last of our 3 targets, the net debt target, was performed as follows: 1.6 for reported EBITDA and 2.6 for adjusted EBITDA. The strong cash flow in Q4 decreased the ratio which is well in line with the target.

I will now hand over to Maria, who will comment on our 3 business areas.

[Maria Forss, executive]

Thank you, Jacob. Let's move on to the next slide where I will briefly summarize our business areas. For quarter 4, the Bioprinting business area reported net sales of SEK 171.3 million, representing 27% of the total group sales. The organic growth in the segment was negative 18.2% and the adjusted EBITDA was SEK 9.2 million, corresponding to a margin of 5.4%. The business area showed weaker sales development compared to the corresponding very strong quarter last year. And the lower sales levels were primarily attributable to the Academia segment and in relation to a strong corresponding quarter last year. The weaker profitability was also attributable to weaker sales compared to quarter 4, 2022.

Moving on to our next business area, Biosciences. In quarter 4, the business area's net sales amounted to SEK 325 million, representing 51% of the total group sales. The organic growth was 9.9% and the adjusted EBITDA was SEK 59.1 million, corresponding to a margin of 18.2%. This business area continued to deliver stable sales development compared with the other business areas in the quarter. The profitability was positively impacted by the sales growth, primarily from project-based lab automation in Biosero as well as rightsizing of the companies.

Our third business area, Bioautomation, reported in quarter 4 net sales of SEK 140.5 million, representing 22% of the total group sales. The organic growth for the quarter was negative 12.7% and adjusted EBITDA amounted to SEK 43.5 million, corresponding to a margin of 13.9%.

Ginolis was divested in November 2023 and is treated as discontinued operations from the quarter 4 report. Bioautomation delivered weaker sales in the quarter, which can be explained by a significant decline in sales in the Diagnostics segment, which contributed to a very strong corresponding quarter in 2022 excluding Ginolis. Profitability for the quarter improved significantly with Ginolis excluded and with regards to the divestment of the building in Berlin.

Before the Q&A, I would like to brief you about BICO's strategic priorities as well as our focus for the months to come. Since I joined BICO in late November 2023, I have, together with Jacob, done site visits to all our companies in Sweden, Germany and the U.S. and have done a thoroughly review on the current state of all our businesses.

BICO acquired many companies during 2021 and successful integration of acquisitions require lots of resources and established internal infrastructure, as well as experience. Therefore, the last 2 years has been spent on improving financial processes, address company-specific challenges and establishing group-wide processes, and these are needed to be able to run an efficient global organization. And during 2023, our efforts were centered around cost control and initiatives related to operational excellence, and we have demonstrated progress in these areas, but we still have many challenges and areas for improvement that we'll have to focus on during 2024.

And my direction going forward is clear, I will, together with my team, spend time on addressing challenges that I have seen and in parallel, we will work to set the strategy for BICO. The work with updated BICO strategy has been initiated, and the launch will be made during 2024.

In order to address the challenges, our 4 strategic priorities for improvement has been defined, and these are: Driving the commercial excellence to improve and strengthen the commercialization effectiveness of our strong portfolio as well as further explore opportunities for collaborations and partnerships.

Secondly, completing a strategic review, and this review consists of an assessment of the R&D road map as well as the group's product portfolio and offering in the light of the market landscape. The findings from the review will highlight commercial opportunities and synergies i.e., how can we further develop our offering and product portfolio, which will be essential in BICO's new strategy given the current macro environment as well as the geopolitical situation.

Thirdly, invest in people and culture. We will invest more in people and culture and to coordinate these efforts, a Global Head of HR has been appointed. This role will be responsible for shaping and executing BICO's global HR strategy to build a people and high-performance culture.

And the fourth and last area to focus on is to continue our operational excellence initiatives. The BICO Group will continue to address the challenges related to improving processes and continue to keep strict cost control. We will proactively monitor all our businesses during the business review in order to keep the pace to be able to reach progress in improvement projects that have been identified. And this area entails work with inventory management as well as supply chain-related synergies also during 2024. And we will continue the ERP implementation and an establishment of a project management office. I believe that these priorities will pave the way for the updated BICO strategy, which will capture current commercial growth opportunities as well as unlocking future potential, and they will guide us through 2024.

With that being said, it's time to open up for Q&A. Please follow the instructions from the financial hearing host.

[Operator]

[Operator Instructions] The next question comes from Ulrik Trattner from Carnegie.

[Ulrik Trattner, analyst]

A few questions on my end. And let's start off with the market environment. I note that some of your peers are projecting an improved market outlook year-over-year from a challenging 2023, perhaps more tilted towards the second half of 2024. And what's your take on the current market environment?

And then in addition, I know that both Eli Lilly and AstraZeneca, they're doing quite a lot of work in lab automation, and they are including your Biosero product, right? And just what's the current ambition out there in the market to invest CapEx in lab automation?

[Maria Forss, executive]

I can start with your second question, Ulrik, and then lead into the first one. Looking at lab automation, that is one of the buzzwords today and more or less all presentations during the JPMorgan conference, the big pharma companies were talking about lab automation as an important part to increase the speed of development of their different development activities but also in terms of manufacturing. So with Biosero and the software, Green Button Go, which is an industry-leading software solution for orchestrating lab flows, I believe we are in a good position to utilize the hot topic and lab automation and the need that is addressing in the market.

And having said that, I think the weaker market we saw in 2023 is likely to continue during part of 2024. And hopefully, there will be a better increase in the latter part of the year. But of course, we are keeping our eyes on the ground to see what's happening there.

[Ulrik Trattner, analyst]

Okay. Great. You mentioned the Green Button Go on lab automation, obviously, very, very sort of encouraging trend. And also note that you've been awarded contracts for the software. But I would like to touch base on your ability to sell additional systems into workflow, where you have established a contract with Biosero or the Green Button Go. Are you seeing the synergies there? Or is there further improvement needed in that area?

[Maria Forss, executive]

One of the beauties with the Green Button Go software is that it's totally instrument-agnostic. That means that we can incorporate whichever instrument from any provider that suits the needs of our customer. Of course, we will also utilize the different instruments that we have in our portfolio that are also strong. And in the event that the customers want to have those instruments included, that will be included together with other instruments to optimize the workflow in the labs.

[Ulrik Trattner, analyst]

But do you feel that the positioning of your systems have improved with sort of inclusion of the Green Button Go? Or is it just more of the same? I [know] it's agnostic but have you felt that you are able to deliver on more high-volume contracts with other systems enabled by Biosero?

[Maria Forss, executive]

Asking customers why they choose us, it's because we have the gold standard in the industry in terms of software and also that we have the flexibility of addressing both, the products that we have in our portfolio which is quite broad and also other companies' products. So there are still opportunities to even more highlight the breadth of our portfolio, but so far, it's gaining rather than being negative for us. So I don't know if that answers your question, Ulrik, or if you have another question connected to it.

[Ulrik Trattner, analyst]

No, that's fine. But if we can continue on sort of the projections for '24. Two follow-ups on that one. The first being Sartorius will now be distributing your products in Asia. And what should we expect from that? And the second being, obviously, we have seen this negative or hampering effect on Academia. And I note that the NIH have just increased their budget just slightly above 2% for 2024. And if we are to expect a sluggish '24 for Academia, i.e., a sluggish year for Bioprinting overall? Or if that can be aided by Sartorius selling your products into Asia?

[Maria Forss, executive]

When it comes to Sartorius, it's a partnership and collaboration that both Sartorius and BICO are key to -- are very keen to make sure that, that is running in the best way, and both are dedicated to do so. I believe when it comes to Academia and the outlook, I like the fact that in the BICO portfolio, we are present in many different areas. So we are not dependent solely on Academia. We are selling to pharma, we're selling to biotech, we're selling to many other sectors.

And the fact that we also are not depending on a single geographical area makes this -- makes me sleep better at nights because then we can utilize the fact -- the breadth of our portfolio as well as the graphical footprint with sales in over 61 countries. So I'm not particularly concerned about Academia per se.

[Ulrik Trattner, analyst]

And then moving on to margins. Can you give us sort of -- I note you have less capitalized R&D, at least versus my expectations. But is there any reasons for Biosciences' lower margins in Q4 versus Q3?

[Jacob Thordenberg, executive]

Well, it's -- as you say, Ulrik, it's partially related to the less capitalization in Q4 and then partially due to a different product mix than in Q3.

[Ulrik Trattner, analyst]

One should not extrapolate either Q3 or Q4 margins as...

[Jacob Thordenberg, executive]

Can you say that again? You broke up a little.

[Ulrik Trattner, analyst]

Sorry. So we should not extrapolate the Q4 margins and perhaps we should not extrapolate the very strong Q3 margin either?

[Jacob Thordenberg, executive]

I think you should extrapolate the development that you have seen between 2023 and 2022.

[Ulrik Trattner, analyst]

Okay. Yes, that's fine. Two more questions on my end. First, like noting really solid improvements here in cash flow. Can you give some background here to -- improved inventory management is obviously something positive here in Q4. Is this finalized and optimized? And -- or are we to expect further improvements on the operational cash flow heading into 2024?

[Jacob Thordenberg, executive]

Yes. But -- I mean, as you saw from the presentation, we have seen sort of significant improvements from net working capital between 2023 and 2022. So I don't foresee that we will see similar improvements going into 2024. We are quite happy with the levels of accounts receivables and also payables.

However, we do believe that we can do further improvements in inventory, but we will not see the same magnitude of improvements in 2024 as within in 2023. So if I could summarize, I would say that in 2023, we did major improvements, as you can observe. And I think in 2024, we can do slightly more improvements, but not in the same magnitude as we saw in 2023. And these improvements then being mainly focused on inventory and inventory management.

[Ulrik Trattner, analyst]

Great. Last question on my end. Obviously, you received the funds from the sale leaseback in Berlin here in Q4, but you still have the Finland property left on your balance sheet. I know it's a challenging environment, then it's a trick one to decipher what the value of this property will be, but where are you at in that process as well as can you give some rough estimation on what's the book value of this property?

[Jacob Thordenberg, executive]

I won't go into the book value of the property given sort of the sensitive nature of that figure. We are currently evaluating either to lease [out] the building or to divest the building.

[Operator]

The next question comes from Rickard Anderkrans from Handelsbanken.

[Rickard Anderkrans, analyst]

I'll start off with a follow-up on Biosero, please. So it seems like Biosero has done very well for -- in Q4 and for the full year. What type of organic growth did Biosero deliver in Q4 and the full year, just to get a sense of the sort of relative performance of that subsidiary?

[Jacob Thordenberg, executive]

Rickard, we won't go into specific numbers of Biosero and how much of our business that comprise. But Biosero is a significant part of our Bioscience business area.

[Rickard Anderkrans, analyst]

All right. And following up on the potential for synergies with Biosero order. So for example, if we take the USD 28 million order you recently announced from the big pharma company, is it reasonable to assume that you could get additional $28 million in BICO instrument sales on top of that as a synergy? Or how should we think and scope for the synergy potential as you view it as sort of a base case thinking?

[Jacob Thordenberg, executive]

Well, I mean, as Maria mentioned to Ulrik in one of his questions, Biosero is a hardware-agnostic business, i.e., that's one of their sort of competitive advantage, is that they could provide any instrument that customer would like to include. With that said, we are, of course, trying to cross-sell BICO products onto the Biosero lab automation flows, but it's not something that we will sort of push on customers. So there are potential synergies. But out of the USD 28 million, it's not equal that, that will be all BICO synergies. But some of it may very well be sort of synergies within the group.

[Rickard Anderkrans, analyst]

All right. So the USD 28 million order is including some of the instruments as well from BICO?

[Jacob Thordenberg, executive]

Yes, it is. It's including the hardware, labor and software connected to automating that lab then for that order.

[Rickard Anderkrans, analyst]

All right, clear. I wanted to follow up also on the sort of broad-based performance. Are all of the subsidiaries in the group profitable on an EBITDA level now sort of exiting the year, just to get a sense of the breadth of the earnings here?

[Jacob Thordenberg, executive]

No, not all of the companies.

[Rickard Anderkrans, analyst]

Okay. Can you share if there's -- is it 1 or 2 companies, which are not profitable on an operating level or -- just to get a sense of the magnitude and the split.

[Jacob Thordenberg, executive]

I think 1 or 2 is a fair assumption.

[Rickard Anderkrans, analyst]

That's helpful. So final question from me, please. So I noticed that the share of product revenues from consumables has been relatively steady in recent quarters. Wanted to follow up again on that one and see -- how should we think about the share of consumables in product sales over time? What's the reason for the slower consumable pull-through on the installed base or relatively stagnant level? Just wanted to follow up there.

[Jacob Thordenberg, executive]

I think that's a very good observation, Rickard. And we have made the same observation. And that is something that we address with all of the companies that are sort of having a consumable part of their offering. So it's not something that we are satisfied with. And we will continue to focus on that in 2024 to increase the consumable parts of our business and also the service business.

[Rickard Anderkrans, analyst]

All right. So if we try to put a fine point on it, based on how the current portfolio looks, are you aiming for 40% consumables of sales? So just to get a sense of the potential of where we could be in a few years' time or your internal ambitions at least?

[Jacob Thordenberg, executive]

Yes, I think that's internal ambitions. And I understand your question, Rickard. I think we will sort of have to come back to my earlier comment, and that is that we also see that consumables and services are not growing as rapidly as one could wish and that is something that we will focus on 2024 and onwards. But I won't give you sort of our internal target number for sort of our long-term ambitions when it comes to that mix.

[Rickard Anderkrans, analyst]

All right. Fair enough. So I guess we should assume that we will see a Capital Markets Day with the updated strategy, and Maria mentioned sometime this year as well?

[Maria Forss, executive]

That's correct, Rickard. We will continue our work with the updated strategy, the work that we have commenced that I referred to before. And when we are ready with that, we will invite you and definitely share the updated strategy and continue the transparency and our journey to profitable growth.

[Operator]

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Maria Forss, executive]

Thank you to all participants who have listened in, and thank you for all the questions. Together with Jacob, I would like to wish you a great Tuesday. Thank you, and goodbye.