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.