Embla Medical hf

CSE:EMBLA

Q3-2025 Earnings Call

[Operator]

At this time, I would like to welcome everyone to this Q3 2025 conference call. Today's call is being recorded. If you have any objections, please disconnect at this time. [Operator Instructions] I would now like to introduce President and CEO, Sveinn Solvason; and CFO, Arna Sveinsdottir. I will now turn the call over to your speakers. You may now begin your presentation.

[Sveinn Sölvason, executive]

Thank you, operator, and good morning, and welcome to the Embla Medical conference call, where we will review the third quarter of 2025. I am Sveinn Solvason, President and CEO of Embla Medical. And joining me on today's call from Copenhagen is our Chief Financial Officer, Arna Sveinsdottir; and Embla Medical's Head of Investor Relations, Klaus Sindahl.

The presentation should take approximately 15 minutes, after which there will be an opportunity to ask questions during a Q&A session. And if you please go to the next slide. Sales in the third quarter amounted to $237 million, representing 7% organic growth, and our reported growth was 11% for the quarter, including 3 percentage point impact from FX and 1 percentage point from M&A.

As expected and as we had communicated, our growth picked up here in the third quarter, driven principally by double-digit growth in Prosthetics & Neuro Orthotics, while sales growth in Patient Care remained modest and sales in our Bracing and Support segment came in flat for the quarter.

EBITDA margin was strong at 22% here in the quarter and on par with third quarter last year, while our margin increased by a full percentage point to 21% for the first 9 months compared to the same period last year. The margin increase was driven by robust sales in our Prosthetics & Neuro Orthotics business area, solid efficiency gains in manufacturing and continued cost discipline in SG&A. In line with our performance recorded here in the first 9 months of 2025, our guidance for the full year has been or is reiterated.

On our strategic initiatives, we are pleased with the progress we are making. Late August, we announced the closing of the majority investment in Streifeneder ortho.production. We are very excited about this investment, which is a strong strategic fit with our Growth'27 strategy and will enable Embla Medical to reach more patients as a full range provider in the broader O&P space.

We're also pleased here in the quarter to announce the successful launch of Odyssey iQ, which is a new hydraulic microprocessor foot solution by College Park. The Odyssey iQ is a lightweight and low-profile foot solution suitable for various environments and activity levels offering long-lasting battery and fast response time.

We have seen good reception of this product in the Americas market since the introduction during the summer. In Neuro Orthotics, we are tracking in line with expectations. Since last year, our focus and strategy has been to expand into new international markets while maintaining the growth momentum in our existing German business. Fior & Gentz was recently also awarded a new reimbursement code in the United States for their microprocessor controlled knee joint, which is a significant milestone for the introduction of Neuro Orthotics in the important U.S. market.

We continue to monitor the external environment closely as dynamics remain volatile, whether it relates to tariffs or other trade restrictions potentially impacting our business. In the third quarter, we experienced some impact from tariffs in the U.S. and continue to assume some absorption in our guidance. And we are as well taking short-term mitigation initiatives, including initiatives on the cost side to mitigate the impact of these tariffs.

Lastly, the U.S. Department of Commerce published a notice for public consultation on a possible Section 232 investigation concerning medical consumables and medical equipment, including prosthetics and orthopedic appliances with the objective to determine the effects on the U.S. national supply security.

We are currently assessing the scope and potential implications and the potential trade restrictions that might result from this investigation. However, several factors remain uncertain at this stage, we still deem it too premature to discuss potential impact until more clarity has been released.

If you turn to the next slide, please. We had solid growth across all our regions in the third quarter, mainly again driven by Prosthetics & Neuro Orthotics. Our sales growth was especially strong in the APAC region with 18% growth, while our EMEA region and Americas delivered 7% and 5% growth, respectively.

If we turn to the next slide, please. If we look at our Prosthetics & Neuro Orthotics segment, organic growth was 13% in the third quarter. The strong momentum in EMEA continues across markets and growth was driven by strong -- both volume growth and solid uptake across all our key product categories, especially in categories such as bionics and feet solutions, where we saw strong growth supported by our innovation, namely Navii and the Pro-Flex Terra.

We're also encouraged by the strong sales growth or sales growth recovery in Americas following a soft start to the year. The growth in Americas was led by key product categories in both upper and lower limb prosthetics and supported by our recently launched innovation. Also, our College Park portfolio showed very good sales growth in this quarter following the launch of our new Bionic foot solution, Odyssey iQ, among others.

Lastly, our performance in APAC was very strong with growth across markets driven here in quarter 3 by China, Japan and very good performance in Australia. In Neuro Orthotics, the business is moving ahead according to plan. And during quarter 3, we saw a good ramp-up in select new markets, albeit from a low base.

If you turn to the next slide, please. Sales in Bracing & Supports were flat in the third quarter. In EMEA, sales ended soft despite good performance in some markets. In Americas, sales were flat, continued headwinds in the U.S. market, but we see solid growth in our Canada bracing business. Lastly, APAC demonstrated some scattered performance with solid growth in Australia and New Zealand, but partly offset by softer performance in most other markets.

If you turn to the next slide, please. Sales in Patient Care grew modestly at 1% for the quarter. We saw mixed performance by key regions in both EMEA and Americas, while our APAC region demonstrated very strong performance across our clinics in Australia. And as a reminder, Australia is the only market in APAC where we operate in Patient Care. If we go back to the big picture in Patient Care, the market is estimated to grow in the range of 3% to 5%, with also healthy operating margins.

Our Patient Care business has, over the last few quarters, experienced lower-than-expected growth, mainly in EMEA and Americas regions. This performance can partly be ascribed to softness and timing in patient volumes, particularly in the first half of the year. However, our Patient Care business has also been delivering below market growth in this period. This recent weakness can be ascribed to internal change initiatives, including the promotion rebrand rollout, platform-wide integration of new ERP and operating systems and other change management initiatives impacting ways of operating.

It's a top priority for management to get back on track in Patient Care, and we have extensive focus on performance management and other key initiatives that will strengthen our execution in this part of our business. Now this concludes our performance overview for the quarter. I would like to hand it over to Arna go through the financials in more detail. Arna, please.

[Gudny Sveinsdottir, executive]

Thank you, Sveinn. Please turn to the next slide for an overview of our financials. In the third quarter, the gross profit margin was 63% on par with Q3 2024. The gross profit margin was positively impacted by the strong performance in Prosthetics & Neuro Orthotics, coupled with manufacturing efficiency. The margin was, however, negatively impacted by modest sales growth in Patient Care and Bracing & Supports in addition to some impact from U.S. tariffs.

For the first 9 months in 2025, our gross profit was 63% versus 62% in the same period last year and on par when excluding special items. OpEx growth was 5% organic in the third quarter or 2 percentage points below our organic sales growth and in line with continued focus on cost management on the SG&A side. Consequently, we delivered an EBITDA margin of 22% for the quarter on par with quarter 3 '24. And the third quarter EBITDA margin was negatively affected by around 30 basis points from FX.

In line with our plans to expand EBITDA margin, the EBITDA margin for the first 9 months was 21% compared to 19% reported for the same period last year or 20% before special items. Net profit grew 17% in both quarter 3 and for the first 9 months. Growth in net profit was driven by strong operating results. Please turn to the next slide for a status on our cash flow and leverage. During the third quarter, CapEx was $8 million or 3% of sales and within the guided range of 3% to 4% of sales.

CapEx decreased slightly in comparison to Q2 and the comparable quarter last year, partly due to the timing of investments and CapEx returning to normalized levels. Our free cash flow was strong for the quarter as we generated $38 million in the quarter compared to $33 million for the same period last year. Our free cash flow benefited from strong operating results as well as positive impact from net working capital and normalized CapEx levels.

It should be noted that the second half of each year is seasonally higher than the first 6 months in terms of cash flow generation. Net interest-bearing debt to EBITDA corresponded to 2.5x at the end of the quarter and within the range of 2x to 3x. That is the target range.

Lastly, we issued around 2.8 million new shares in early September in support of the maturity investment in Streifeneder ortho.production. We also bought back roughly 525,000 shares in the third quarter as part of our ongoing share buyback program at a market value of $2.7 million. With this overview on financials, I will hand over to Sveinn for his closing remarks and comments around our guidance.

[Sveinn Sölvason, executive]

Thank you, Arna. Please turn to the next slide. In the third quarter, growth picked up as expected, driven by double-digit growth in Prosthetics & Neuro Orthotics, with a solid momentum in EMEA continuing and growth in Americas picking up following a soft start to the year. In line with our performance to date, our full year guidance is reiterated with 5% to 6% organic growth and 20% to 21% EBITDA margin. As previously communicated, the guidance assumes some absorption of tariffs, although uncertainty around the exact impact remains. With this overview, our presentation is now concluded, and we would like to open the call for questions.

Operator, please move to the last slide and the Q&A can begin.

[Operator]

[Operator Instructions] Our first question comes from the line of Jesper Ingildsen from Carnegie.

[Jesper Ingildsen, analyst]

Congrats on a strong quarter. I have a couple of questions. Maybe firstly, we can start out on the strong performance within Prosthetics & Neuro Orthotics. Could you share a bit of thoughts around sort of like what we should anticipate going into Q4 and beyond? Like is there anything we should consider in terms of timing or anything similar? And also I guess you have somewhat tougher comps in Q4?

And then maybe moving on to your Patient Care business. As you're alluding to, it's an area where you have been underperforming the market, which I think is clear in the light of one of your competitors recently going public. Could you talk a bit to what initiatives you are doing here to improve the growth and how soon we can expect the growth to improve?

[Sveinn Sölvason, executive]

Yes. Jesper, thanks for the questions. On Prosthetics & Neuro Orthotics, this was one of those quarters where we had tailwind across all our major regions, and we saw solid performance across all our major product categories. And it's also fair to remember that we are also comparing to a fairly strong comparable quarter last year where we generated 9% organic growth in Q3 '24. I would not like to comment or give very specific guidance by segment here for the next quarter. But how should I put it? We've been consistent in our performance in Prosthetics & Neuro Orthotics over the last many, many quarters.

And we -- there's no reason for us to expect that, that shouldn't continue. But obviously, also mentioned that we can see quarterly fluctuations. With regard to your question on Patient Care, I would like to sort of take the opportunity to take a step back and back to the big picture in Patient Care. We have, over the last decade, built up a very strong platform in Patient Care.

We've made acquisitions in key markets of high-quality companies, but have operated these entities with limited integration, maintaining separate brands, et cetera. Over the last 12 months, we have taken significant steps in order to move to the next maturity stage in Patient Care to operate a global business, a truly global business, benefit from scale. And in order to do that, we have rolled out a new brand here over the last 12 months and will complete mostly on that here during '25.

We also made significant investments in processes and systems alignment, rolling out a new clinical management system, for example, in our whole U.S. platform here over the last 18 months and making -- moving -- most of the platform now is operating on the same ERP backbone system. And this has caused some disruption in the business we have to acknowledge and has impacted our performance here over the last -- yes, especially here in the last 4 quarters.

And -- but the big picture is that the patient care market is very healthy, growing mid-single digit with solid operating margins. And we have full urgency on getting back on track in Patient Care, and we will. So that's a little bit where we are today.

[Operator]

The next question will be from the line of Tobias Nissen from Danske Bank.

[Tobias Nissen, analyst]

Congrats on the quarter. Just to build on Jesper's question on the Patient Care platform. You had some headwinds, also external headwinds with lower patient volumes. And now you're taking the step to focus more on improving this segment. When should we expect like some meaningful improvement in this? Is it like second half of next year? What are your expectations here?

And then just in terms of M&A and buying some more clinics, does this mean that you're taking more of a pause now to do this and more focus on driving this incremental performance improvement for the clinic network? Let's just start with that. I have another question afterwards.

[Sveinn Sölvason, executive]

Yes, Tobias. On the Patient Care side, I mean we -- if I start with the M&A questions, I mean, we are still building a pipeline in Patient Care. And -- but our first and top priority is to make sure we are growing at least in line with market. And our top priority is to make sure we execute on these changes such that we run a healthy Patient Care business. And we do see lots of opportunities both for organic as well as external growth going forward.

Now with respect to timing, I would not like to comment too detail on that. We will provide more detail as we report our quarter 4 numbers and provide guidance for 2026. But I will still expect that during '26, we will be operating in line with market growth rates, at least.

[Tobias Nissen, analyst]

Okay. Perfect. That's perfectly clear. And then just this quarter, you had the 7% organic growth, quite strong. I was just looking at your guidance of the 5% to 6%. Should we expect you to reach the higher end of this range given this better performance than what was expected in Q3? And what are like the downside risk to this and you're achieving this also because you normally have a pretty strong Q4, especially for the Patient Care segment, if I remember correctly.

[Sveinn Sölvason, executive]

I would like to just go back to a previous communication in terms of that we have been consistent here in around both quarter 2 and quarter 3 reporting that we expect the second half to be stronger than the first half and are now just reiterating this 5% to 6% guidance. And we do expect the average growth to be higher here for the second half than first half. So I wouldn't want to be more specific than that.

[Operator]

And our next question will be from the line of Martin Brenoe from Nordea.

[Martin Brenoe, analyst]

I got a few questions, but I can maybe start with 3, and then I'll jump back in the queue. Maybe just first of all, completely appreciate that you cannot quantify the tariff impact on a longer horizon with all of the moving parts that we're seeing. But can you maybe just quantify the impact that you had in this quarter and whether or not you expect the impact from tariffs to increase or decrease going forward, at least just at face value? And maybe a bit wording around what you do in terms of mitigations also in terms of potential price increases? I'll start with that question and then jump to the next 2 questions.

[Sveinn Sölvason, executive]

Yes. Martin, thanks for your question. I mean I can say that we -- the tariffs that we are absorbing here in quarter 3 are close to $2 million. And that -- from what we know today, we would expect something similar in quarter 4, perhaps a little bit higher. That is what we -- based on what we know today, but there is, as you all know, some uncertainty around these tariffs.

Our ability to mitigate depends on our ability to pass on some price increases to our customers. We have not done that to date. We can work with our suppliers and are also actively evaluating the different scenarios that we have in terms of, let's say, once there is more clarity in terms of long-term situation, we will take action. But we have decided to hold off on major changes in our supply chain until we have more visibility in terms of what assumptions we're working with. But this is a topic that has higher urgency and consumes time and energy to monitor the situation and also plan for different scenarios, and that is just where we are.

[Martin Brenoe, analyst]

Very clear. Maybe just as a follow-up to that. Are you having any considerations on moving production at least partly to the U.S.?

[Sveinn Sölvason, executive]

I think we will, as all companies just need to evaluate the feasibility of having a larger footprint in the U.S. I mean we do have some operations in the U.S. We do have a manufacturing -- small manufacturing platform with our College Park business in the United States. We also have our central fabrication service in Orlando.

And this will just be one of the scenarios that companies in our position would need to evaluate once there is more clarity in terms of what the medium, long-term landscape looks like when it comes to trade restrictions and tariffs.

[Martin Brenoe, analyst]

Very clear. That makes sense. Then just -- and we already talked about Patient Care, but I was actually just wondering a little bit whether you could put some color on the patient care mix because Prosthetics is clearly growing very fast, but there are other products that are not growing as fast.

And just wondering if the Patient Care is mirroring the mix that you have in terms of Prosthetics versus low-margin products or whether you have a bigger component in the Patient Care business that is Bracing & Support and that type of products, just to understand a little bit better what's driving the patient care.

[Sveinn Sölvason, executive]

Yes, that's a good question, Martin. And if we look at the business mix in Patient Care, that does vary by geography. And the reason it varies is that the different health care systems have taken different choices in terms of how they deliver some of these mobility devices. All else equal, you can say that, for example, our U.S. Patient Care business is very focused on Prosthetics & Neuro Orthotics or other custom orthotics.

That is the main business for Patient Care in the United States with a little bit of off-the-shelf Bracing, but very limited. However, if you look at a typical patient care provider in Continental Europe or in Europe, there, you would typically see a broader range of services, both Prosthetics, Neuro Orthotics and a fairly broad range of other mobility type of solutions.

So it is -- yes, it is different. However, I can tell you that our recent weakness in Patient Care is not because we are seeing some erosion of some sort in categories outside of our core product categories. That is not what is the reason behind the short-term weakness we are seeing in our Patient Care business. All else equal, we see healthy development across the vast majority of these product categories that we are focused on in our Patient Care franchise.

[Martin Brenoe, analyst]

Makes sense. And then just a final follow-up question to that is that your Prosthetics business is obviously growing very fast. It's not really reflected in your retail. So I'm just wondering which channels are you selling your Prosthetics & Neuro Orthotics products through them? Is there anything to point out in terms of a changing distribution landscape or any specific channels that you are growing much faster compared to earlier?

[Sveinn Sölvason, executive]

Well, there are 2, let's say, 2 points I'd like to make in relation to this question. First of all, it's important to remember that our geographic footprint is not the same in our Patient Care business and our product business. So all else equal, you can't -- you're not -- we should not always expect the performance to correlate.

The other point I'd like to make is that our -- the health of the industry is reflected in our -- the underlying performance in our core product business, which again underlines the fact that we are -- the reason for our underperformance in Patient Care is principally related to the substantial change initiatives that we are executing on.

So -- and also maybe the third point is that only a small part or a very small part of our product business goes through our promotion clinics and all of that is very transparent in our reporting. And our main channel has always been and will continue to be the O&P market or the Patient Care or our independent clinical customers. That is -- remains our core channel for where we focus and how we grow our core product business.

[Operator]

[Operator Instructions] Our next question will be from the line of Yiwei Zhou from SEB.

[Yiwei Zhou, analyst]

I have 2. Firstly, in the U.S. and do you expect any disruptions from the U.S. government shutdown in Q4?

[Sveinn Sölvason, executive]

No. we have not recorded any major disruption, but we are monitoring the situation, but we've not received any concrete feedback on that.

[Yiwei Zhou, analyst]

Okay. And secondly, you have well explained the short-term disruption on the growth and also the margin and the Patient Care business. I was just wondering if you are looking at a bit longer term, all those operational initiatives you have done on your business, the patient care business, do you expect to improve the long-term profitability? And if you can elaborate?

[Sveinn Sölvason, executive]

Yes, I can say -- maybe comment high level on that. It is -- the reasons we are doing these changes is because we believe in the benefit of operating a truly global patient care business, where we build a business, where we have scalability around certain systems and processes that we are better able to benefit from technology in terms of how we fabricate, in terms of how we operate with our patients.

So that is the core, I guess, assumption behind our actions in Patient Care. What is also a fact is that this is a business where we have -- it's a capacity-driven business and our profitability will be dependent on our ability to serve patients and utilize our capacity costs. So in a year like now, we will go to the fourth quarter where we are flat on top line, and that means that it has a negative impact on profitability because the vast majority of fixed costs.

So yes, we are -- our profitability in Patient Care has taken a temporary step back while we go through these changes. But we firmly believe and have a strong plan for how we will get back on track. And I think that should also be looked at in light of our performance on the profitability side that is still despite going through these changes and absorbing costs in relation to, for example, the brand change that we are absorbing. This is all cost we're taking through the P&L here, but still we are protecting and increasing our baseline margins.

So if you're hoping for some more detailed forward-looking guidance, I will disappoint you, Yiwei, but this at least gives you some color.

[Yiwei Zhou, analyst]

No. It was good. It was good. In this context, I was wondering if you can give an update on your -- the CRM and also the -- used to call, Össur Leg but I guess it's Embla Leg solution. I remember a few years back, you highlighted as sort of a new marketing tool and trying to convince the clinics to push the leg solution. And could you give an update on this? You have seen any progress?

[Sveinn Sölvason, executive]

Yes. That's a good question, Wei. It goes back to how we think about our competitive position and our value proposition towards our independent clinical customers. Generally, independent clinics are struggling to sometimes find CPOs and some are struggling with maintaining adequate capacity in terms of fabrication. So we have -- our success with it going forward will depend on our ability to, one, bring the right product to the right patients, but also help our independent customers around aspects such as fabrication.

And that is what the complete leg concept was all about that we offer our independent customers an ability to outsource fabrication to us. And this is a service we offer both in the U.S. and in Europe. And this is also one of the areas where we gain some scale and some efficiencies in operating both as a patient care provider as well as a traditional product business where we can build more scale around some of these activities like fabrication. So that remains part of our core strategy to do that.

[Yiwei Zhou, analyst]

And I recall that it used to be one of the main regions that was -- the clinics was very sort of giving some pushback and slow adoption. And have you seen that have been improving over the recent quarters?

[Sveinn Sölvason, executive]

We've seen gradual increase in adoption, and we're also using this as a sample fabrication for our own clinics. So this is a core part of our business for sure.

[Operator]

And next up is Martin with a follow-up.

[Martin Brenoe, analyst]

Just 2 follow-up questions. It's already been touched a bit upon, but I would just want to be sure whether there on Prosthetics & Neuro Orthotics is anything to flag in terms of any sort of one-off items in any way on revenue or anything to flag in terms of big contracts or big orders, anything that is disturbing the picture a little bit just to be sure.

[Sveinn Sölvason, executive]

No, there is no -- nothing like that. It is -- like I mentioned in the beginning, it is one of those quarters where we just do have tailwind across all our regions and markets. And you also have just to name one example as we have high growth in the APAC region this quarter, where we are growing again in China after 5 quarters of decline.

So there is no big off quarters or anything like that in these numbers. It's -- yes, simply strong execution across the board. And we're obviously also getting benefit from having recently launched products that are well received in the market like the Navii, like also in the Odyssey IQ during the quarter, the Pro-Flex Terra and the Icon by College Park. So these are all strong products that are being well received by our customers.

[Martin Brenoe, analyst]

Very clear. And maybe that's a good lead to the next question because the thing that I would like to understand a bit better is maybe -- and maybe you already said that by the wording you used, what is the key delta here in this quarter? Is it the product launches that you have and the broader portfolio that is sort of expanding your total addressable market and now you are firing on more cylinders than you used to. Is there any customer types that you have increased your sort of exposure to? Or is there any regional sales that is just doing better than you expected?

[Sveinn Sölvason, executive]

Actually, I attribute a lot of this growth. And I think it's fair to say that this is above what we would expect. I mean, we do expect the Prosthetics and Neuro Orthotics to deliver strong organic growth rates. But what we see here in quarter 3 is above what we expect on a normalized basis. And I do attribute that mainly to the new product launches that are giving us this tailwind.

What has been different than what we had, for example, on the Navii launch has been a good one. It has not cannibalized our RHEO sales as we expected. That's one aspect that I think is relevant to mention. But otherwise, I would go back to my previous comment in terms of just like the nature of this quarter being a quarter where we just have tailwinds across all regions.

And again, pointing towards APAC, where our Australia business is also benefiting from the reimbursement slowness we had in '24, so getting some extraordinary benefit here in '25. So there's a lot of these things that come together that push our growth rate above what we would consider a normalized growth for this part of our business. But still reminding everyone that we do expect, all else equal, this part of our business to generate good growth rates as the structural growth drivers are there.

[Martin Brenoe, analyst]

Very clear. And just final question for me. Just I think, if I Again it serves a question. Just wondering what -- if you can specify a bit more what the growth is? I know it's in line with the expectations, but I just want to be sure that I know what the expectation was.

[Sveinn Sölvason, executive]

Yes. I mean I think we -- if I go back to our early communication around Fior & Gentz, we expect -- we said the business has grown organically around 13%, 14%. And we expect at least those type of growth rates, and that's what we are delivering on. And Fior & Gentz is a top priority for our company to make sure we take the right trade-offs in terms of prioritizing building this business as it is a very strategic for us in terms of building products and services towards a patient population that is vastly underserved when it comes to access to good mobility devices and where you see the exact same health economics that provides a strong rationale for health care systems to fund good Prosthetics.

The exact same dynamic is on the Neuro Orthotics side and it's a market that is less mature than Prosthetics in terms of reimbursement and access and awareness. And that's our goal to really focus on this and be disciplined in terms of where we focus our efforts because this is -- yes, this is a top priority for our organization.

[Martin Brenoe, analyst]

Completely agree. And just on Fior & Gentz in the U.S., you got the health codes, which is great. I guess that it's not really starting to contribute yet. Can you put a few words on when you expect to hit the ground running in the U.S.?

[Sveinn Sölvason, executive]

We will be more specific around that when we set guidance for 2026. There's lots of work going on to support our U.S. execution, and this is a big milestone for us, this recognition that we can operate and build this specific code. So we will be more specific around our estimates for the U.S. and Europe products when we set guidance for '26.

[Martin Brenoe, analyst]

So what I'm hearing you saying is that it's going to be big enough to impact the group guidance for next year. That sounds great. Happy to hear that.

[Sveinn Sölvason, executive]

Well, it's -- we're obviously starting from a very low base in the U.S. So all growth moves the needle. So we'll be more specific around this at year-end, Martin. Thank you.

[Operator]

Next up is Tobias Nissen, Danske Bank.

[Tobias Nissen, analyst]

Just on Bracing & Support, it like remains flat year-over-year. I'm just wondering what's the strategy here also since it continues to like grow below your estimated market growth? And what are you seeing like underlying, are you seeing any improvement here in Q3? And how do you also balance this with the tariff impact, et cetera? Are you putting products from the market to them being unprofitable? I'm just wondering what should we expect from bracing and support going forward?

[Sveinn Sölvason, executive]

Our goal is to grow the Bracing business at least in line with market. This has been a tough year in our Bracing business, mainly in the U.S., which is a market which again has been impacted by these tariffs, and that's also a market where we have -- where the channel structure is different.

We also see more, let's say, some movement between channels, Bracing business moving to fewer bigger customers. But we still maintain our goal to grow at least in line with market and our ability to achieve that will depend on some moderate expansion of our product portfolio, tapping into a few opportunities where we can use our existing channel access to bring a broader set of product services to our customers.

It will also depend on our ability to execute on volume opportunities and thirdly, to continue to have or to, let's say, be a good partner for our customers in terms of ease of doing business because we do offer a broad complete portfolio in Bracing of high-quality products. And these products all remain fundamental to each and every health care system. These are products that we all know and all use if need to.

So we are working hard to take the right choices that we are able to generate that market growth in Bracing. But it's been a tough year, especially with these -- all the turbulence that these tariffs have created in our biggest Bracing market, which is the U.S.

[Tobias Nissen, analyst]

Okay. Okay. That's clear. Do you have any time line for when you expect to expand this portfolio? I know you have a lot of receipt to do with the Patient Care and driving the performance back there, but any comments would be appreciated.

[Sveinn Sölvason, executive]

I can -- I would like to push further details on that out to our quarter 4 and guidance discussion, which we'll be having in 3 months.

[Operator]

The next question will be from the line of Peter from Berenberg.

[Unknown Analyst]

Just looking at the PA and NO segment, could you possibly give some more color on the regional demand for the Navii and Icon product launches and possibly give some kind of commentary on whether there's been much adoption of these solutions by kind of K2. I know you noted that there has cannibalization in the RHEO knee bot, but you could give some more color there, that would be fantastic. And I've got a follow-up question as well.

[Sveinn Sölvason, executive]

Thanks a lot for your question. On the -- when we look at the Navii, we've seen good adoption across all our major markets, both in the U.S. and in Europe. The Icon has principally been -- we've principally been focused on the Icon in the U.S. market. And I think it's also fair to say that our growth in the U.S., we do see some impact from the coverage expansion.

We obviously don't have full transparency on the ultimate, let's say, profile of the patients that are receiving these bionic devices with our independent customers in the U.S. However, it is -- we have those strong indication that this coverage expansion is part of the growth story in the U.S. And yes, so that's a bit where we are on that. And what I mentioned also earlier, we've still seen our RHEO business, which has historically been our kind of flagship bionic product continue to do well in selected markets.

So now if we look at Bionics, we have a much stronger portfolio that addresses a bigger part of the underlying patient population. We have the Navii, obviously, we have the RHEO, we have the Icon and we also have the high-end power knee as well. So a much stronger Bionic portfolio. I hope that gives you a little color.

[Unknown Analyst]

Yes, that's fantastic. And just on Patient Care, apologies if I missed it earlier. But I think I read that you're more than halfway through kind of rebranding. I suppose my question is just about when is this expected to complete?

[Sveinn Sölvason, executive]

So we expect to be through most of the rebranding this year and have taken also some costs in relation to this initiative. So we'll be mostly through it already this year. And we are also through a big part of the systems piece as well, which is key to our operating model going forward.

So lots of work here over the last 18 months on building the foundation for our Patient Care business, which we are confident will deliver at least in line with market going forward.

[Operator]

As no one else has lined up for questions in this call, I will now hand it back to speakers for any closing remarks.

[Sveinn Sölvason, executive]

Thank you, operator, and thank you, everyone, for calling in this morning. Please, if you have any follow-up questions, don't hesitate to reach out to our Investor Relations function, and I wish you all a pleasant day. Thank you very much.