Terveystalo Oy Ord

Good morning all. My name is Juuso Pajunen. I will be having today a dual role as the host of the Terveystalo half-year result presentation and as a CFO at a later stage. But let's now give the word to Ville Iho, President and CEO of Terveystalo, and let's start the webcast for the half-year results.

Ville, please. Thank you, Juuso, and good morning from sunny Helsinki. Let's start recapping Terveystalo second quarter. Of course, it was a busy quarter for Terveystalo. We, of course, released multiple big things, not the least Silma-Asema acquisition, our new financial targets and our new strategy. On a business side, it was still a challenging quarter. The market conditions continue to be abnormally negative and that has been reflecting into our revenue line and with that one also to profitability to our numbers. We made adjustments according to the lower volumes and given that one, given the actions we took, we can be of course pleased with the Customer service results, customer experience numbers are all-time high as well as medical quality key indicator pay. But revenue line obviously negative as well as adjusted EBIT EPS and also net debt to EBITDA leverage ratio went slightly up. Double clicking on those negative market drivers. First of all... Public purchases from private healthcare, which are not even seen in this slide, were still almost non-existent. So healthcare counties have insourced quite a bit of their activities, and they are still reorganizing the cooperation models with private healthcare providers. So that was clearly negative. Then from our biggest business, occupational healthcare services, the number of employed persons in Finland, which is the baseline of the baseline, was negative. It was still down from the baseline. Previous Q2, on top of that one, frequency of use was still down and negative is of course negative. That's been reflecting into our numbers in occupational health care. On consumer side, it's still negative. The consumer confidence grew slightly. which is of course positive news. All in all in market volumes we cannot see a positive trend but in terveystalo numbers actually the consumer driven services grew during Q2 which is of course positive but given the occupational health care headwind the full volumes of terveystalo were down. Looking at the different segments and business lines, healthcare services clearly down due to lower volumes and lower revenue line with negative occupational healthcare numbers. Positive is the fact that consumer demand grew, especially against the latter part of Q2. And that can be seen as a trend change in that segment, which obviously is positive. Portfolio business is down due to low demand and some structural changes, obviously termination of all outsourcing contracts and then sale of our child welfare business earlier. Sweden volumes are still under pressure, but the efficiency development has been really positive, and we can see the trend changing in profitability as well. We cannot yet claim a win in Sweden, but clearly we have been able to turn the trend around and platform is there, efficiency is there. With those numbers, of course, group numbers were negative or trend was negative. Still double-clicking a little bit on the core business, classic business within healthcare services. Occupational healthcare with our largest segment is the key for turning around our big machine. And We have been conducting a major, major overhaul in that business line. Commercial, operations, digital all are going or have gone through a major overhaul. We are pleased with the progress of the program, occupational health care turnaround, but it is slowly turning a sticky business model where the turning around the contracts, gaining wins, take time and Now, when looking at H2, looking at the future quarters, we don't see yet a big uptake in the connected employee numbers. It's rather a more stagnant view for H2, and bigger gains have been postponed to 2027. We are moving forward, we are making progress, we are renewing our commercial model, our operational model, and introducing world-class digital tools to this business line. But as I said, turning around the bottom line for the business takes time. We are in a very interesting state in our business where classic business, of course, needs full focus in turning around that one, specifically occupational health care. We have a great agenda there. and a great team conducting that part of our agenda. At the same time, as we see, the whole healthcare services industry is in a transformational mode. And for that reason, we have renewed our strategy. We released our Arc strategy earlier. and there are a couple of major shifts that we start conducting and new directions where we start moving towards. From value creation point of view, obviously, there will be way more weight on growth rather than protecting profitability. First example, obviously, is the Silma Asema acquisition. In products and pricing, we see as megatrends continue to be positive, we of course need to tackle reasons not to buy services from private healthcare providers. And one of them is uncertainty around pricing packages and not being adequately transparent towards organizations or corporates or private consumers. We are moving ahead with more fixed price products, productizing more of our services in retail mode and with that one increase demand and volumes. Service delivery side. There we need to have our eye on value for money. We will continue investing in high-value care chains in brick and mortar, so that continues to be a big part of our business going forward. On the other hand, more simplistic services will be steered more aggressively to digital channels, and there we have a great agenda for create tools already in place. And with this combination, a value for money for users, for payers, will be protected and improved going forward. In customer relationships, with the new, expanded, more versatile portfolio, of course, we need to be able to leverage that customer base with upcoming Silma-Asema acquisition. We are talking about 2 million customer base only in Finland, and that creates a lot of opportunities for cross-selling opportunities We need to create an engine for running the loyalty and cross-selling. That's a focus area for our arc strategy. On top of this one, we are making a shift, gradual shift from reactive episodic care chains and complementing them with more continuous care type of models. And that's going to be visible during H2 this year. We are on a move. This is, again, not a PowerPoint slide. It's a living agenda where we are already moving forward. When we are talking about growth, of course, biggest components currently, most visible components are Hohde and Silmaasema acquisitions, which will... Jointly, we are going to create the 1.5 billion outpatient masterclass in products and pricing. We have started already last year scaling these fixed price products, and I will show some deep dives into the impacts of that one. In service delivery, on top of the earlier world-class digital platform, we have introduced new type of service modalities. and specifically an asynchronous service model which is even more efficient, more accessible with a lower price point but at the same time still high margin. A customer engagement, as I said, will start rolling out continuous services during H2. So we are on a move. A little bit double-clicking on the key points in already implemented AHRQ initiatives. Obviously Silma-Asema highly visible acquisition, as I said, will create 1.5 billion outpatient care masterclass jointly with Silma-Asema. It's a highly synergistic case with a lot of potential to grow beyond a first phase in long term in this market and upcoming markets. It will balance our revenue mix and tilt that one more to a growing private pay domain, which is of course positive for terveystalo and evens up the cycles. And as I already mentioned, we are creating 2 million customer base with respective opportunities for cross-selling and increased loyalty models. This is clearly a spot on against our strategic targets and themes. Then, discussing a little bit about these fixed price models, some from the audience have asked, why are we moving in this direction? Hasn't it been easy enough to buy services already earlier? But our data shows clearly that the reason not to buy private healthcare services many times is not the price as such. It's uncertainty around what do you pay for, what do you get, do you understand what type of package you are getting. And there we need to make a move as an industry and of course we need to lead the way. We have start scaling. We have fixed price packages in various services and we can clearly see a stimulation effect in all of these services that we have launched already. So tackling those reasons not to buy clearly will increase volumes, increase demand and that is going to be a way forward. Of course not all of the services can be fixed price because healthcare is healthcare, but we can scale this one quite a bit. As I said, we have launched new asynchronous digital service for use in occupational healthcare. Specifically, it's a new modality which is even more efficient than the previous digital chat and video appointment models with a lower price point, a little bit different type of service package. It's fast, it's accessible and complement our package and service. creates a new line for growth in the digital domain. With ARK, with our new strategy, of course, we also released new financial targets. We are still, of course, aiming at growth, annual adjusted EPS growth of 10% stays, But we create more room, headroom for growth with the new leverage ratio and profit distribution targets as stated here. And we are embarking into the ARK growth journey from age two onwards. And Double and triple clicking on ARC, save the date, Capital Markets Day 2026 will be held 1st of December this year and there we will share a lot of insights around what has already been done and what's going to happen for terveystalo, new terveystalo in 2027 and onwards. And with that one, I'll invite Juuso on stage.

Good. Thank you, Ville. So, let's talk about the financial performance in the first half of the year and especially in the second quarter. First of all, second quarter was as difficult as expected. We are in decline in revenues in EPS and in EBIT. The market did not materially change if we look at the conditions during the quarter or when entering the quarter. But if we see the in-quarter development, it is good to note that Special the consumer market started to pick up and we saw clear stabilization what comes to occupational health care. And also in Sweden we have seen the first glimpses of positiveness in the market. But with all of that one, obviously we are behind as expected for the second quarter with our numbers. Efficacy of care were on all-time high numbers. But let's then double-click it a bit further. So, basically, the weak demand continued in all business areas. If we start from the healthcare services, the occupational health demand remained weak, both from the Thank you very much. A reduction of outsourcing business but the public sector remains to be very sticky. Sweden as said is little by little now seeing improvement in our own performance but also the market is more and more solid when looking forward. So in healthcare services If we look on different segments, so occupational health, let's look a bit further on the following slide as you have now gotten used to on the visit growth component, both in occupational and out-of-pocket part. It was sticky. The connected employees, they are now stabilizing. If we compare to Q1 to Q2, we are now in a more stable base. But at the same time, it is still below previous year. And basically, the demand drivers in the occupational health remained the same as earlier. At the same time, it's good to know that now the visit frequency is stabilizing and the other KPIs are also getting more and more stable. Sales pipeline remained at a good level, but the conversion, as Ville also explained, into new contract has been slower than we have expected. Then if we look on the operational efficiency, that continues to be in place. We have taken restructuring measures. We announced statutory negotiations in April that were concluded in May. The outcome of those one will start to support further and further in the second half numbers. And at the same time, if you look Thank you very much. Then looking on the volume development, it continues to be challenging. The underlying factors that contribute on the decline in occupational health visits have not gone anywhere. We didn't expect them to go anywhere also when we talk about Q2 numbers. So basically the general decrease in the employed population, we have the employers who are still in the cost-cutting mode and they are addressing the scopes of the contracts. and basically the number of connected employees in total. They contribute into the decline in the occupational health. But at the same time, as said, the further we have gone during the quarter, we have seen stability and we have seen, for example, the visit frequencies to stabilize. And if we are looking for what we have, as Ville explained, we have a solid, solid sales pipeline. Then on the positive side, when we are looking at the consumers, again, the further you look from April to June, we have seen that the consumer market has been picking up and has continued to pick up. And we are now in the visit frequency actually above previous year's second quarter. So all in all this contributes into a 6.5 percentage decline in the visits, which is also a better number compared to Q1, but obviously the weight of the upper respiratory disease is smaller in the slower quarter. Looking on the portfolio businesses, our... The story has continued pretty much as expected on the trends from Q1. We have the outsourcing businesses, those legacy contracts are declining as we have known, as we have communicated. It is also good to know that these contracts have now been margin positive and thus also the reduction of the revenues is visible on the reduction of the profits. Staffing business and the public sector in total has continued to be in decline. However, the rate of decline has continuously stabilized and the situation has been improving compared to earlier quarters. Public sector in general has been very sticky and is on a very low level continuously. We have seen some positive glimpses that have not yet materialized. And there are some contract vendors out there also in the outsourcing side that will come out to play at the later part of second half. And on a dental, this is positive. We are gaining market share. We are positive both in revenues and visits. And at the same time, it... confirms the trend that we have on out-of-pocket customers in the healthcare services perspective. We will get a further boost on the dental with the Hohde acquisition. The approval is pending and at the moment we are expecting that we would gain the approvals during third quarter. It would mean that we would be within our own expectations both from the approval Timing perspective and the content perspective when getting to the status that we would get the approvals. But obviously it is an authority process and it is completed when it is completed. But our expectation is after the summer. This will also double our dental business and it is exactly in line with our ARC strategy. Going into Sweden, I'm really happy that now we are little by little getting clear improvement what comes to both EBITDA in absolute terms and in relative terms. Both EBITDA and EBITDA are improving, again still declining revenues. What we have seen during the quarter and what we have seen During the year is that our efficiency starts to be really strong and now on the next step we will have more and more eyes on the growth and the operating leverage will support the business. At the same time the market environment is slightly better than it has been earlier and when going forward within the quarter we have seen that for example the purchase frequency of our clients has been growing first time in a long time. Which is a positive signal for the market recovery being in action. Our investments, we have not changed our strategy. We are accelerating digital. You have seen the M&A. We have announced Silma Asema. We are expecting to close the Hohdet deal during the Q3. We will continue to invest into future growth. M&As will be selective, will be value-creating, and organic investments, they are basically... especially in digitalization and then on the physical infrastructure including also the leasehold improvements and medical equipment. So we have not changed our investment strategy when going forward. Looking on the cash flow, Q2 cash flow was actually fairly solid. We are at 175 million operating cash flow in the last 12 months and we saw a positive Thank you very much. Our net debt amounted to 560 million euros and net debt to EBITDA on adjusted EBITDA was 2.5 and on EBITDA was 2.7. We are within our target range and we have a solid, solid, solid balance sheet also when going forward. At the same time, we all know the announcements on the MFA, and we have now, during the quarter, we have renewed our funding structure to fund the ongoing acquisitions and to refinance our old loans. So during the quarter, we have secured 550 million euros of committed bank financing, both for the Hohde and Silma-Asema acquisitions, and that's set to further boost the maturities. We have also increased our revolving credit facilities from 80 to 100 million and completed a TAP issue under the existing sustainability link bond. With all of that one, we have now the maturity curve is very stable and it is good to note that The 27 and 29 packages are also including extension options. So our funding is at a very good place when looking forward and supporting our strategy. Then going into the markets, the demand environment is anticipated to improve during the next 12 months and at the end of this year at the same time. But also looking at the trends, they have not materially changed. If we look at the second quarter, the consumer market has been better. In Q1 it was a red downward arrow. Now we have the visits are in growth and the revenues are stable, hence we are at yellow in the Q2 performance. But at the same time, the next 12 months in all of the market segments remain to be within the same trends as we have communicated earlier. So public sector is on a very low level. We see some movement and positive indications that it has bottomed out and it could be also at least stabilizing forward consumer pool is good both in out-of-pocket dental and massage services and it is expected to continue on a positive trend. Insurance follows fairly well the consumer market and occupational health that has been widely explained during this call also has been read and is expected to stabilize during and has started to stabilize during the year and then improve little by little within the next 12 months. And Sweden sees positive indications on market recovery when looking forward. With these ones, let's go to the guidance. You have seen that we updated our guidance two days ago. We expect our full year adjusted operating profit to be between 120 and 140 million euros. Previous year was 156 million. Profitability in the first half was clearly below the level of comparable period in 2025 and that has been impacting the guidance and the environment has been challenging. When looking forward, we are expecting the demand environment to gradually improve and upper respiratory diseases are anticipated to return to long-term averages during the second half of the year. At the same time, we are not expecting Material improvement from the connected employees for the second half and we are expecting the wins to materialize in 27. No changes for the outsourcing operations in the portfolio businesses and these do not include material transactions, not Hohde, not Silma Asema. At the same time, having said that, it is good to note that if Hohde transaction closes within our expectations, we are getting, let's say, a couple of months of performance So it would not materially change our guidance range at that point of time. With these words, let's invite Ville back and let's start the Q&A. And as explained in the beginning, I will... Work at the same time as a CFO and host what comes to the questions. We will start with the questions from the lines. We have nobody sitting in the room so we start with the questions coming from the webcast listeners and then we will go if there are questions remaining on online posted questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Sami Sarkamis from Dansky Bank Markets. Please go ahead.

Hi, I have a couple of questions. We'll take this one by one. Firstly, regarding the guidance cut this week, how much of the reduction is driven by Q2 performance and how much is related to the second half outlook?

First of all, thanks for the question. It's both. Obviously, we are trailing during Q2 slightly against our targets, so that's one factor. The other one, as you saw, and hopefully also I explained, is the stickiness of the occupational health care system. Market, despite the healthy sales pipeline, we have not been able to materialize a major increase for the connected employee numbers for H2. Rather, the increase is expected to time at the year end. So those are the two drivers. Maybe Juuso wants to double click on the ratio between those.

Yeah, I'd say that, like Ville said, it is both components and the ratio. This is a bit academic. Maybe we have a bit more emphasis on the occupational health connected employees development compared to the performance in Q2 specifically, which was slightly below our expectations when entering the quarter.

Okay, and then continuing on this outlook, if we think about the new midpoint, what needs to happen for you to get there? So what are you assuming regarding second-hand developments related to current trading, for example, in Q2? How much improvement is assumed?

So basically, if we look at the midpoint, 120-140, so the midpoint is 130, which basically means that the second half development is broadly in line with the second half development previous year. So what we are expecting in there is... that we have the upper respiratory diseases would remain into the long-term average and we have a slight pickup in the market let's say especially in the consumer side. What we are not expecting is a material increase in the connected employees that would generate revenue during the second half in that guidance.

Okay and then regarding The development in connected employees during second half, it seems that you are now quite a bit more negative on that. You said that you're expecting the situation to improve at the year end, but not before the year end. Have you already won those deals or do you have visibility on this sort of stronger 27 on this front?

Yes, so it's always a mathematical exercise when you are looking at the sales pipeline and renewal pipeline as we have discussed earlier. Then you estimate the win rate in respective categories and then you push that forecast forward. There are obviously a couple of wins, one already which will start next year, 1st of January, but really what we are looking at is forecast based on our pipelines. and as to the more negative basically during Q2 the number of connected employees has been stagnant or stable so there we are not more negative we are rather slightly more negative on the forecast because we see how the earlier pipeline has turned to actual revenue generating deals for H2.

Okay, so the real change in second half outlook within connected employees is that during Q2, sort of your win rates were not as high as expected.

You are right, in new sales, yes.

Okay, and then... You're talking a lot about growth investments, but I'm not hearing much regarding cost savings. Your competitors talk more about those. Given the oversupply situation during the past year, can you summarize what cost measures you have taken and what are you still planning to do during the remainder of the year?

If I start, then Juuso can follow. We are, of course, when we are talking about frontline services and lower volumes, we are adjusting, and actually we can be quite pleased how the operations have been reacting to new situations. So the number of FDs actually in our frontline services ratio is lower than the... negative volumes that we have seen. So we have slightly overreacted in frontline to lower volumes. which is a sign of good sort of ops leadership. Where we are not saving, we are not in restructuring mode, we are not in the saving mode, is investments and focus on growth. We have recruited quite a bit of new people to our sales organization, to digital organization, to customer service. Yes, and just to complement that, obviously we don't tell

Future items in that sense, but if you simply see what we have done, we will continue to react on the market environment, and if you a bit interpret the future, you see that our average numbers were 11% down in Finland on the personal for the quarter, and the end of period was actually 13% down. So obviously, like I said during my slides, that the restructuring measures taken in second quarter will support the Thank you very much.

A little bit discussed in our release is back office efficiency acceleration that we are now pushing forward with the AI-driven Nova project. It has kicked off and it will yield more efficiency and a lower headcount to respective back office functions.

Okay, then my final question would be on the new commercial offering. You're planning to introduce more fixed price contracts. Your competitor has been having bad experiences from these. So how do you make sure that, for example, these new pricing models cater for potential cost inflation in the future?

Well, first of all, there are two different buckets. You are more alluding to corporate contracts, which are fixed price in our strategy. Of course, that's in the play as well, depending on the customer needs. We are not big fans of fully fixed price corporate contracts. The experiences from both clients and suppliers are not great. So there we... Thank you very much. Be it health check or joint replacement or that type of clear packages that are clearly priced, easy to understand what you are getting. And as I showed in the presentation, we have First of all, we have data stating clearly that the main reason not to buy from us or from any private player is not the price as such. It's uncertainty around the price and package. And then when we have applied these fixed models, we can see that it stimulates nicely the market and demand. And that's what we continue scaling.

Okay, thanks. I don't have any further questions.

There are no more questions at this time, so I hand the conference back to the speakers.

Good, thank you Sami for the questions. It's a busy day for analysts. There are a couple of questions coming from online, so I will put them one by one on the table. The first set of questions is related on the pricing that we already touched on the final remarks. There's a question from Roni that has the price competition intensified further during second quarter and has it also gone into the old customers and not only into the new ones?

Yeah, we discussed the pricing schemes quite a bit earlier, so no need to go back there. But we also a little bit commented in our release the price competition. So obviously we are in an abnormal situation in healthcare services industry. With the really, really abnormal oversupply situation, that's not going to stay around. That's the first thing to remember. From Megatrend's point of view, this is a growing business where demand will continue to grow and supply is limited. But in this cycle, we are seeing oversupply. And that, of course, is reflected due to higher price pressure. Thank you very much. Thank you very much. On the other hand, of course, we need to create all the time new pricing schemes. We need to adjust to customer needs, etc., etc.,

Thank you. I think that covers very well the question. Then there's the second set of questions relates to our guidance and future expectations. The other part is that how much the flu season drives the guidance range. And then the second component relates to our statement, especially in the Wednesday, that the recovery of net sales and profitability is expected to lag behind the improvement in demand. And there's a question to elaborate that one. A bit further, so how the work goes. First of all, let's take the flu season and the totality of the guidance. So as we have stated in the guidance that we expect the flu season to jump back into the long-term averages, which means that it is more intense than it was in the second half of 2025. And then obviously these type of expectations have a They are expectations and estimates by nature that creates always a range. And then if you kind of try to put that one to some kind of a perspective, You can pick an average price between 100 and 200 euros per episode. You need to remember that it's not only a one single flu, but it is also the length of the care part, how much it generates diagnostics, so it's also the type of the flu that impacts on that one. And that creates one mixed component. And then you need to take the long-term averages and what it would mean if would be on the same level or if it go to the long-term averages and you get kind of a range impact calculated on that part. Then on the why we are expecting that the net sales and the profitability will lag behind, this is especially coming for the connected employees and the occupational health. So obviously when a flu patient comes into our appointment, that income comes in immediately. It contributes to our revenue immediately. It contributes to our profit immediately. But when we win an occupational health contract, for example, then obviously only when the connected employees are rolling in, it starts to generate revenue. So that is the reference to lag.

Yeah, and as we have always said, and as you know, Especially the occupational healthcare market is post-cyclical. We can see post-cycle as a negative phenomenon currently, and then when the cycle turns, as it seems to do in Finland, there's a lack and delay.

Then we have further two questions what comes to Sweden and portfolios. Sweden basically, our performance relative to market in Sweden and what do we see for the pipeline forward. It's good to note that in Sweden already since end of previous year we have been net positive in winning. So we have been winning more contracts than we have been losing contracts and that tendency has continued in 26 years. At the same time, it has been countered by the purchase frequency of the clients, and that's why we don't see revenue increase in the Swedish numbers. But all in all, in the markets, we have been performing fairly well. It is a different structured market and a competitive market, but the recent developments, we are net positive what comes to wins. And on portfolios, there's a question coming from the profitability, and as I explained also in my slides, that the Legacy contracts, we have been fighting hard to make them at least somewhat profitable, and that's why the decline in those ones has eaten and will continue to eat the profitability when we are going forward in absolute terms. So that one is fair to say, and I think we said it also earlier. With these ones then we have two questions remaining. The other one is to Ville clearly on Silma-Asema and new markets. Could we think that Silma-Asema platform can be scaled to new markets in the future and do we see opportunity to scale also digital capabilities to new markets as the domestic market is fairly sluggish?

Yes, clearly, starting from Silma Asema, the model they have sort of perfected is unique. It's a winning formula, and there's no reason to believe that one not to be a winning formula in other markets with specific fitting characteristics. I'm optimistic around that one. Silma Asama can scale also outside Finland. And I know that there has been some concrete plans as well. And of course, we will dive deeper into those once the integration starts. Then digital platforms. We have now one concrete example that we are applying with a certain model. So it's a MedHealth platform, our joint venture in occupational health care. We have been now busy in applying that new digital model. and other world-class digital platform into our own corporate clients in Finland. That rollout is progressing well. It's scaling nicely and customer feedback is very, very positive. Then beyond that one, of course, we will have more focus in scaling that one. There are some... Other assets that we could envision scaling, but mostly, as we have said in our strategy earlier, we want to combine services. We want to be close to the client, specifically private paying clients, and combine digital assets to services.

Thank you, and then finally we have one nitty-gritty coming from the tax consequences, and then we are through. So we communicated in Q4 last year that we had a tax audit ongoing, and we got a retrospective component on that one that was impacting Q4 results. The follow-up of that tax audit was concluded in the second quarter of 26, and there was no material tax consequences for Terveystalo in retrospective for that audit. and thus we don't have ongoing tax audits in Terveystalo Group. With these ones I thank you all. I wish you a very pleasant summer and hopefully everybody can get a bit of time off before the summer ends and we are back in business. Thank you all. Thank you. Be safe.