Terveystalo Oy Ord

Good morning, everybody, and welcome to Terveys Talos Q4 and full year 2025 results call and webcast. As usual, we'll go through the results with our CEO, Ville Iho, and our CFO, Juuso Pajonen, and we'll follow that with a Q&A. My name is Kati Kaksanen. I'm responsible for investor relations and sustainability here at Tervastalo. We'll take the questions via the phone lines first and then follow with the questions via the webcast at the end of the presentation. Without further ado, over to you, Ville.

Thanks, Kati. and good morning from cold and beautiful Helsinki. Let's dive into it. Tervestalo results 2025. It's again time to take a couple of steps back and look at how we performed last year. Sort of the big headline here is profitability and efficiency. If one looks at our performance, financial performance, we are delivering all time high profitability. And as you can see later across all of the segments, they are improving. If one looks at profitability, things are great. If one looks at quality of our services, things are great. On the other hand, of course, you can see that we are living in a market which is not favorable, but that only underlines the efficiency of our operational and financial engine. We are able to produce robust results even during headwinds. Healthcare services is post-cyclical industry and now we can see in our services frequency of use of services we can see decline even though number of customers during the year was the same as during 2024. But strong financials, declining revenue due to macro and post-cyclical nature of our business, very strong improving quality. Double-clicking in the performance of our three different P&Ls. Healthcare services improving with declining revenue, portfolio businesses improving with declining revenue, and Sweden improving with declining revenue. All of these things running the same story. Market is difficult, but we have been able through our actions to improve operating leverage efficiency, improve our engines. And as you can see from a longer trend, Clearly, the best results ever produced by Pervestal, thanks to dedicated, focused work in our operations. Given the circumstances, the focus of our actions, of course, tilt more and more towards customer and growth. In headlines, the agenda is intact. We concentrate in healthcare services, of course, still in digital transformation, getting even more efficiency, productivity into our processes. But, as I said, even more focus in customer value, generating growth through all of the segments. Consumers, Kela65 and insurance customers are our focus areas where we are gaining ground. Occupational healthcare, we are investing heavily in renewing our products and services. We have a two-year program. started last year and we will invest 20 million euros in products and services and renew those and once the market turns, of course, we are stronger than ever. In portfolio businesses, we have said that we will fix the profitability and then we step into the growth. And from the results you can see that we have delivered the profitability turnaround. And as you saw from our actions before year end, we signed a deal on acquisition of Hohde in dental services. So we are really delivering on growth as well going forward. We are investing into that one. Sweden, similar kind of story. We have, through our program, we have fixed the profitability. We are pleased with the results. Against very difficult market, we have improved the profitability. And now we are ready to invest and grow that part of the business as well. Hohde deal is a major milestone for portfolio businesses and specifically to dental. In our earlier CMD, we said that dental is part of our core offering. We will invest into that one. We will roll that one. We will double the business while doubling the profitability. And this is a major milestone in that journey. Not surprising, but a very logical one. The joint combination of Terveystalo, Dental and Hohde will be a really strong and high-quality player, generating ever more value for our customers, for corporate customers and consumer customers alike. And we are, of course, very excited and proud of this step. We have been leading digital transformation in outpatient care for quite some time, and we continue on that journey. If one looks at this transformation in a little bit more structured way, we can distinguish three different modalities that we continue investing in. So we have a more traditional hybrid integrated care continuum, which is still going to be physician-led. And there we invest in better integration, higher efficiency, better toolkit for professional and better customer experience and patient experience for our customer. There we have just launched a major new platform for professionals called Ella, so that's our professional interface whereby they are able to process appointments and care continuums in a higher quality, higher efficiency manner. the info and data is more structured and steps logical and transparent when a patient is moving from one step to another in Care Continuum. This will further enhance this ELLA platform and scale during this year. But we can already see tangible results after the launch. In the middle part, we are talking about algorithm-led digital health retail modality. And there, really, the automation and no-touch, very low-click type of operation is the key. Enter into our services, you come from web or app, then you are engaging with the automated AI assisted care and patient steering engine, then you are steered either to a traditional modality or to digital appointments, either to more traditional chat type of service, which we will make more and more efficient, Or just recently launched semi-automated AI-assisted appointment modality, where actually the target is that the whole appointment chain can be processed by a professional at the end of the development by single click. And this is really fast, really available service area, which we will further invest into. We have fast development pace in the area and investment yield results. Final domain in the transformation is insight-centric proactive care, where best example in our implementations now is MedHelp platform, which we will introduce during Q1 for occupational health. customers, clever insights, clever use of data, activation of patients and customers in right time and situations, and making a major step from reactive traditional healthcare morality into proactive insight driven. The semi-automated appointment is exciting stuff. As I said, we just launched a couple of weeks back this new chain of appointment activity from patient point of view. As I said, you enter into the services typically through app, then you are engaging with the AI-assisted care steering engine, then that's directing you into if the diagnosis scenario is relevant, it will guide you into AI-assisted appointment cycle, where actually at the end of the development, when we are developing this one during this year further, professional is able to approve the diagnosis only by single click and then you get your diagnosis, you get your guidance to whatever is the right action to do at the end of the cycle. really exciting complementing our already really efficient digital platform and providing us as direction to the future and further potential for our better customer value, higher availability of services and at the same time higher efficiency and profitability. With that one over to Juuso.

Thank you, Ville. So let's talk about our financial performance. Obviously, it's already 100 minutes old report, so you know the numbers by heart. So let's start actually from the journey. Three years ago, I was standing here first time on telling quarterly results of 22. And at that point of time, we had annual EBITDA percentage of 8.4%. And we thought that we are brave when we say that by 2025, we will reach 12% EBITDA. Actually, we reached that one already one year ahead of time, delivering 12.8% in 2024. And this year, 2025, we are delivering 14%. And now everything you see in these numbers, what comes to efficiency, signal and proves that point that we have made a sustainable, strong change in our operating model, and we are as efficient as one can be. And with Ville's description on the customer journey, one-click customer journey, we can still improve our efficiency. So where we are today is that in quarter four, we are in all efficiency metrics strong. We have improved our EBIT, we have improved our margins, we have improved our EPS, We have not done that at the cost of our client satisfaction. Our appointment NPS is 87.6, which is extremely strong. Our medical quality indicator pay is at all-time highs also. So we are efficient, we are impactful, and we are delivering financials. But at the same time, it is fair to say that we have revenue headwinds. Let's go through those ones a bit more in detail when we go on to the segment level. But all in all, quarter four highlights, we are strong, we are efficient, but we have market headwinds, and we will address those ones. If we then look on the whole group, we have positive margin development, so like explained, we have the strength, especially in our efficiency metrics. The revenue was under pressure in all segments, and we will go them through on the segment levels. What we have in the megatrends is basic, or in our trends, we have the outsourcing portfolio, we have the occupational health visits, and the connected customers. So all of that one is actually a continuation already from Q3. Then, when we are looking at the adjustment items, we have 12.7 million euros. It is good to understand that majority of these ones are related on our efficiency actions, on our ongoing projects, where we have taken an extra push in Q4. And the material part of those ones are consulting fees that are based on success. So they wouldn't be here unless we have been successful. And thus, of course, when the consulting assignments have now, especially in Sweden, and material parts ended, we are in a positive place on that one. Then on top of that one, we had... A write-off related to divestment of child care services, that one has actually now closed in 1st of February, so it will be totally out from our numbers starting 1st of February 26 onwards. That is a non-cash related impairment, and then on top of that one we had a tax dispute that contributed to these ones. So one-offs pushing our reported EBIT lower, but still also that matrix is in a strong place. If we then go deeper and we start looking healthcare services, so here margin improvement clear, annual margin improvement also strong, but we have the headwinds in the revenues. Visits are 7.6% down when adjusted for the one working day more in the calendar. And then we have other impacts slightly positive, but all in all the revenue is 5% down. go a bit deeper into the visits and the volume growth in the following slide but all in all we have a strong plan but we also post cycle company and post cycle by the industry logic so we are just now under pressure but with the efficiency that we have in our platform we will turn this one around and with all of the actions we have in place and the underlying mega trends have not gone anywhere so this is by nature seasonal and macro driven so as a post cyclical company the trends are continuing we we can split it now into different buckets we have the seasonality This is roughly 70,000 fewer upper respiratory infections during the quarter, and that has now continued in January and in February, so the current flu season is weaker than in ages. That one contributes a certain amount, we can't impact that one, it comes and it goes. Then we have the macro-level item, which basically means that As a post-cyclical company, the macro catches us later. So companies, when you have a continued sluggish macroeconomic environment, companies tend to invest less in their people, but they started, that's the final place where you want to cut on your investments. That's why it hits us a bit later than in some other industries. And that one... we can work on, we can concentrate on client value, we can concentrate on delivering highest possible impact with an efficient motor, but we can't hide away the fact that when companies start reducing their investments, at one point of time it also impacts us. But we have a clear action plan, both on how we capture back the growth, irrespective of the macroeconomic environment, and then how we utilize our efficient motor when we capture that growth. So we are in a positive place in that one from plant perspective, and we are confident that we deliver on that one. The public sector has been now remembering that we talk about the healthcare services, where the capacity sales, is a minor part of the total offering. It has been in a weak position for a long time because of the well-being counties first setting them up, then chasing costs, but now the environment starts to stabilize little by little, and we have seen some positive signals, but at the same time it is still fairly unpredictable market, on which I come later on the coming slides. And then we have the positive momentum from the consumer. We have both the insurance market, where the number of insured continues to grow slightly, but also we have a strong market share and really appreciate offering for the insurance companies. And then the Kela 65 has produced positive volume growth and continues to deliver positive volume growth for 26. So all in all, we know what is happening, we have our action plan, and we will deliver according to that action plan. Then if we look portfolio businesses, we have a clear profitability improvement that has continued. We also, it's good to acknowledge that previous year Q4 was a difficult one, and now we are obviously clearly improving on that one. The revenue... was contracting because of the outsourcing contracts according to plan. It's also good to note that we have been very solid in steering those contracts and running those contracts and they have now started to deliver also profits which have been contributing Q4 results. Staffing, this trend is still partly of our own selections earlier. But at the same time, the market continues to do difficult. We have seen some positives in the total market environment, and we have been gaining market. But well-being counties are still in the cycle where they are evaluating how they operate in the future. Dental and the private continues to be the positive part of this story. We have been able to grow the top line, grow the bottom line, and we are trending to the right direction. And then you have seen our investment in Hohdepp. If we then look on Sweden, the market continues to be difficult. It's good to note that the operational efficiency is improving. We are ramping up on the EBITDA percentages. We have on the EBITDA percentages slightly decline on a non-cash related impairment item. actually positive impairment from previous year Q4. So all in all, we are in plan, we are delivering, we are bringing the efficiency up, which we have done, and now we are in a place where we can start to utilize also this platform in an efficient manner and start ramping up the revenues. And the pipeline there is strong for the for the future, so we are confident on Sweden, but obviously then the market conditions and the employment levels continue to be challenged also in the Swedish market. If we then talk about investments, I think that in here what is happening is exactly what we have told. We have said that we are ramping up our investments in digital, and we are also doing physical investments. On the digital part, Ville explained about Ella, about the one-click journey. Those are a couple of the highlights. We have the MedHelp cooperation that we launched last year in the second half. It's now starting to deliver actual output during Q1 in 26. So what is important to note that when we do an investment, the investment cycle is fairly short. from start of the investment to actual use of the digital asset is happening. Ella, it is the UI for the professionals, it's already in use by hundreds of doctors and the next phase rollouts are now happening actually as we speak. Medhelp, we are now in a status where we have started to introduce it to our clients and we are in the first rollout in Q1. So also this one is progressing. It is not a promise in the future, it is an action today. And that one we will continue. We will continue in investing both organic and inorganic growth. also in the future. And now with the M&A agenda, we have the Hohde transaction, couple of smaller bolt-ons, and so on. And then on the focus part, we divested the child welfare. That leads to cash flow. I have nothing new to say on this topic, but would have not been repeated for the past 12 quarters or whatever. We continue to deliver cash, whatever we do in the bottom line, we do in the bank accounts also. 207 million cash flow, slightly soft. There's a timing component on the accounts payables. Last day of the year was now a banking day, and we are responsible towards our vendors, who are most of them are small, and we pay on due dates. Pushing one day forward, those payments would have made actually a visible number change on this number, but that's not how we operate. Leverage 2.1 continues to be all-time low. When we want to invest, we can invest. We have the powder in our leverage ratios. And once again, referring back to Hohde, that one is under the competition authority approval, so not yet visible in the leverage ratio until we gain approval, and then we both get the business on to our end and hand over the money to sellers. Looking back on our financial targets, we have three targets. EPS growth 10% per year. We also told that 25% will be clearly better than that 10%. We are now at 0.73%, 29% up. Net debt to EBITDA being below 2.5%, but can trail above it when an M&A occurs, we are at 2.1%. And then the leveraged dividend, attractive dividends, at least 80% of the net results, 64 cents proposed by the board of directors, meaning 88% of the net profits as a total, and 33% handsome growth on the dividend for a year, assuming, of course, that AGM approves it. And so we do what we promised to do. We have delivered on each of these metrics once again. Then before going into the guidance, it is good to have few words on the demand environment. When we talk about this picture, what we are saying is that the demand environment is anticipated to improve gradually by the end of 26. So the 25 arrows describe where we are starting the journey this year, and 26 is like a balance sheet item. The arrows are describing where we expect to land at the end of this year. So what is happening now is that if we look public sector, it is yellow. And at the same time, we have continuous modest positives. We have some big ones. We do know that there's some big ones in the tender pipeline. There was one in Q4 last year. But at the same time, the predictability is fairly low. Well-being counties are now polarizing, and how they start to behave has been always difficult to predict. And for that reason, we are in the yellow part on that one. But still, I need to highlight that there are lots of positive weak signals around there that could merit further positives in the future. Consumer market, we have a positive situation, maybe a bit more in dental and in the total consumer market for 2016. we are still positive. This is mainly contributing the Kela 65 and related. In insurance, it is a where insurance penetration slightly grows still. At the same time, insurance companies are getting better and better on steering their customers and impacting the market. So it is a positive market, but at the same time, last time the dynamics was the dark green arrow upwards. So we think that that momentum is not as strong as it was earlier. What comes to occupational health, we have a strong plan, we had a difficult 25, we are addressing all of our issues, we are confident that we are getting into growth, but now the market will remain challenged during 26 in total. And Sweden, we are seeing that the improvement for 26 is in the pipeline. So with this type of market dynamics, We come to our guidance. Our guidance for 26 is 135 million to 165 million of adjusted EBIT. 25, 156 million. So basically, we are guiding a corridor where we have room to improve, but also based on the market conditions, we can be weaker than this year. The estimates are basically built on a gradually improving market environment or demand environment. We already know as a fact that first half upper respiratory diseases will be clearly below previous year. You have seen how it behaved in Q4. You can go to see our open data sources to see how January, February up to week seven have been behaving or up to week six at the moment have been behaving, so we know as a fact that it will be difficult flu season for the first half of the year and then we are expecting for the second half normalization so with all of that one it means that our first half will be below 25 due to the market environment, due to the respiratory diseases. But when we go forward, then we are seeing gradually improving markets. Portfolio businesses will continue to reduce by some 20 million on the revenues on an annual basis. And then finally, our guidance, is not including material acquisitions that includes hohde transaction also we do not know when it closes and it's not included in these numbers so with all of this one i think we are going for a in absolute terms solid 26 but of course in relative terms there are also scenarios where we can be weaker than in 25. with these ones Let's invite Kati back onto the stage and let's start the Q&A.