AcadeMedia AB (publ)

So, good morning everybody and welcome to this presentation that I will have together with Petter Sylvain and I will make the introductory remark and tell you a little about how the quarter has developed on page two. And this third quarter, I must say we're very proud of the quarter, it's a stable quarter, we are improving the growth, the profitability and all our segments is a part of the stronger financial development. And we have also invested in quality and increased the teacher qualifications, we have had a lot of efforts to improve reading and maths and we have also developed the international strategy. And we have set a target that we 2030 should grow in Germany to 200 units and be the leading operator in Germany and we have also made just after the end of this quarter two important acquisitions, one in the Netherlands that is called Yes and one in Germany. And this is important steps and that shows also that we have the possibility to go ahead and achieve our strategy and our targets. And then if we continue to the next slide, we have made efforts to improve the qualification system and now we are aiming at improving the teacher's certificate. And as you see at this slide, we improve it in both our segments, we have history where we have had other competence in our schools and we are really now at the positive track and we have quite easy also to recruit good teachers. And if we should look at the key subjects like maths, we have almost 100% when it comes to these key subjects teacher certification. And as I mentioned, we have this continued journey when it comes to the international And for the moment, we just opened our 100 preschool in Germany and now we are aiming for 200 preschools in Germany. We have we have around 50 units coming up and we think that we could grow when it comes to the preschool organically. But if we look at the roadmap when it comes to the international schools in Germany, we want to be the leading operator. And then we have to three double our revenue. And what we did now is a good first step with acquisition of Potsdam that is a school with more than 1000 students. And we also have improved our footprint in the Netherlands with more than 20 preschools and we have now a platform of more than 30 preschools in the Netherlands and 10 schools. So two important acquisitions that support our international roadmap. And if we look at Academedia and the historic development, as you follow the company, see that we have a strong financial performance with 19% cargo development over here, stable year out, year in. And this is a result of the strategy of diversification and growth and also acquisition. And we have now a footprint of more than 40% outside the Swedish school voucher system. And we have a target to reach 50% when it comes to this development. So a strong historical development. And as Petter will show you in a few minutes, we also have a strong balance sheet that will also support that we could make acquisition and go ahead with our plan. So with that introduction, I will hand over to you, Petter, and go through the numbers and I can take also some questions afterwards.

Thank you, Marcus. And good morning, everyone. Delighted to see that we continue now our international growth. As Marcus outlined, we achieved a good growth of .2% with contributions from the acquisitions of Tula in Finland, that amounting to 4.6%. And additionally, our adjusted profit margin increased to 7.2%, and that was compared last year's 6.9%. And that means that we will be reaching 377 million in absolute terms up from 327 million. If we flip to the next page, the improved adjusted EBIT are evident across all segments. And in the preschool and international segment, the increase of 13 million is driven by positive contribution from the acquisition of Tula. In the compulsory and upper secondary segment, we have a stable situation with an increased deficiency in upper secondary. Adult education continues to report strong results driven by high unemployment and better utilization rates. Let's look at the quarter development within each segment, and we start then with the preschool and international segment on page 12. The number of children increased by 18.3%, with growth witnessed across all countries, excluding Sweden. Our growth was primarily driven by the acquisition of Tula in Finland, along with new preschool openings in Germany. The international operations account for approximately 30% of the group's total sales. Net sales increased by .6% compared to last year, with organic growth at 6.9%. Adjusted EBIT and margin was slightly reduced compared to the previous year. This year's margin, 6.5%, was down from last year's 6.7%. Last year's result was positively affected by retroactive revenues amounted to 10 million. If adjusted for these retroactive revenue in the quarter, the margin was improved by 0.4%. The operating profit increased to 121 million compared to last year's 108. The improved result was mainly a positive effect from the acquisitions of Tula, while the rest of the operation remained stable. In the 2025 preliminary school voucher increase in Sweden is estimated to be 2.5%, or is confirmed rather, and in Norway it has been 4.5%. After the end of the reporting period, we completed, as Algar Markus mentioned, two acquisitions. In April, we acquired Yes in Kinderoppaiken with 22 preschools, and in May we acquired the international schools in Germany with 1,250 students. Let's move on to the compulsory school on page 13. We now note a .9% increase in student numbers. Net sales rose by 8.2%, driven by increased numbers of students and the positive impact of the annual school revision. Adjusted EBIT and margin increased slightly compared to the previous years. This year's margin reached 7.2%, which is up from last year's 7.1, and the operating profit was 85 million compared to last year's 78. The 2025 school voucher increase in Sweden is estimated to 3.1%. Now we move further to upper secondary school on page 14. And here we observe a .6% increase in student number. The sales growth of .1% was driven by more students as well as annual voucher revision. The adjusted margin increased this year's 9.1%, which is to be compared with last year's 8.2%. And this was achieved because of good cost control in the quarter and increased retroactive revenues. 2025 preliminary school voucher increase in Sweden is estimated to be 2.6%. If we move on to adult education on page 15, there is a 5% increase in sales, which is due to a high number of students in particularly higher vocational education. Adjusted EBIT increased to 53 million from previous years 43, with a margin of .4% compared to .7% last year. Let's continue to page 17, and there we talk about free cash flow and investments. A free cash flow for the last 12 months was close to last year in absolute terms. The free cash flow as percentage of the EBITDA is, as expected, around 70% of this quarter a little bit lower. If we then continue to maintain this, sorry, if we continue to the next slide, page 18, the financial position, net debt excluding IFRS 16 decreased by 250 million, sorry, 40 million compared to last year, with the leverage ratio excluding IFRS 16 at 0.7, which of course well below the financial target of less than three. Even including property-related lease liabilities, the net debt including the net debt is lower. This is due to low indexation, low number of new entry contracts in the quarter and FS effects. After the end of the reporting period, new loan agreements were signed with free banks, which is securing financing until 2028, with the possibility to extend until 2030. And securing future financing for a longer horizon is vital for Academedia to be able to execute on its acquisition agenda that Marcus talked about. And this will be important to lead to our goal that 50% of revenues should be financed from other sources than the Swedish school vouchers. Let's move on to page 19, our financial performance against targets. Our organic growth, including small bolt-on acquisition stands at 6.1%, which meets our financial target of 5 to 7%. Our adjusted debt margin of 6.6 falls below the target range of 7.8%, but we are slowly improving quarter by quarter and rolling 12 and are getting closer to the target. The leverage ratio of 0.7 remains well below the required threshold of 3, leaving further rooms for acquisitions when opportunities occur. And with these words, I end the presentation and we open up for questions.

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 Johan Lankvist Sundian from Carnegie. Please go ahead.

Good morning, Marcus and Pester. Thank you for taking my questions. First one for me is when reading through the CEO comments in the beginning, you highlight Marcus the kind of ongoing review of the Swedish in the school system and that you analyzing the outcomes and are open to adjust your operations. It would be very useful if you can give some more color on what you see is changing and how you are to kind of adjust your operations for this potential change in the market setting.

When it comes to that comment, first of all, we are talking about inquiries. Nothing is really done. Nothing is decided. And this is now going out to let different organizations also comment on these different sort of inquiries. But when it comes to this transparency inquiry, we have to increase the way that we take care of emails, report different structures, financial documents to prepare to make it more transparent for media or public persons and so on. And that is what we are talking about. That is a quite easy step for us as a big organization. But we really don't know if this will happen yet. But it is about the transparency question.

And have you made some kind of over back of the envelope calculation what it would cost for you? So you can have some kind of review? Or do you think that...

What we see so far, it will not affect us. And as I mentioned, we are talking about something that will happen in one or two years and it is not decided yet. That is important. Nothing is decided. But of course, we always prepare. And when it comes to the cost, I think they will not be high because we have a big organization. So it is more about the sector and how it will affect the sector.

And the other kind of topics raised in this review regarding forbidding paying a dividend during the first few years. There was also discussions about looking over the kind of voucher system. The kind of initial take from your side on those two topics potentially impacting your business.

You can say the voucher system is not presented yet. So there has been a lot of discussion around it. So it is difficult to comment on that. And our view is and our report says that we are under compensated and has been that under many, many years. So we will see what will be the outcome of that. But when it comes to the dividend question, we don't take dividends from units that we have started because it will take us three or four years to make it profitable. So that is not an important question. Then when it comes to the dividend, if you make a decision, that is not really an important question either. But I think that will be changes from this inquiry because I think they understand that the dividend is not something that we can talk about for many years. It is a long time. So hopefully it will be a shorter time. And it is about making trust among the public organisations. So the dividend, we don't think that that is the right thing to do if you want to regulate the sector. But if they have to do it, it will be of course more complicated for us. But we will handle it.

And the timeframe, Vestges from today to implement into a new kind of market structure. How long time are we talking?

We are talking first about the period of inquiry and discussion between the political party. And that will be, maybe this will be on the Parliament's table just before the election. But I'm not sure. So, and then when they decide about it, it will take maybe one to one and a half year to implement it. So, but it's important to understand that nothing is decided. Nothing is decided. So it will be up to discussions. And even if things will be decided, it will be decided maybe just before the election next year and implemented 27, 28.

Very clear. My second topic I want to discuss is margin expectation in the adult education business, which has performed well recently. And you're highlighting the report that there are, the Swedish government are investing into adult education. So if we assume that volumes hold up or even grow in the coming year, do you think it would be possible for you to maintain the kind of margin level seen this year? Or should we still expect margins to kind of come down to say long term average?

We believe that as long as unemployment rates stays at the level that it is now, that's the minimum for continuous demand. And the current forecast supporting that to some degree, but I mean, that's public data. So that's up to everyone to make the estimations. And that should normally mean that we should be in the higher part of the interval of the 9 to 11 percent or even exceeding that, that's what we might do currently trading. And that's how it has looked historically also. So the main reason if we wouldn't be able to achieve such high margin going forward is if there is a change in unemployment rate, if the unemployment rate is starting to fall. And of course, sooner or later that will happen, but we don't know. No one knows when it will happen.

Excellent. And final question from my side, it's on the cost levels on the compulsory side. Note there was a little bit of a pick up in cost here in Q3. How kind of temporary or how temporary are the pick up here? The

cost of a compulsory school, one should view it for a longer period of year to date, so I would say. But having said that, the margin is stable. As you see, we're increasing with one percentage point. And while the reason why it's not increasing, but it's staying stable is fundamentally that in compulsory school is where we're investing most in quality initiatives and quality initiatives correlate to high degree of more specialist in support skills of teaching mathematics and Swedish. So we don't expect a margin reduction, but we don't expect any major margin improvement from where we are now.

Great. And just one final question. It's on the retroactive revenue part, which is where we are quite in the dark for forecasting. How should we expect that to impact your profitability in coming quarters? Any extraordinary that we should be aware of that are to come?

So it's a little bit difficult question to answer. The way we just give a little bit more flavor. We always have retroactive revenues. It's part of the compensation system that compensation is done afterwards when it's calculated in municipalities that if we look for Sweden, for instance, but it's similar in the other countries, that they had higher cost than they had anticipated in the budget. So there are always the delay of compensation. And the key question is, is there any major changes in a period compared to the other period for comparative reasons? So we have a that's what we try to explain in reportings in the reporting if there is a significant deviation for comparative reasons. But having said that, and just to explain for this quarter, for instance, if we looked at the preschool segment in the preschool segment, an international we had last year, and you can read that in report, there we expressed that we had 10 more millions in retroactive revenue while we had no retroactive revenue this quarter. So on the other hand, we had more retroactive revenue in Q2 in the preschool segment. If you look at the year to date, the preschool and international segment, there is a margin improvement. And a higher degree of that margin improvement is in the international business than the Swedish part of the preschool. So rather long answer to we are a little bit in the dark ourselves for a particular quarter. It could happen that there is a deviation that we didn't really force that we didn't really forecast would happen in that quarter because we don't really know when they come. But seen over a couple of quarters, this typically even out compared to the when you compare the years.

OK, thanks for that answer. I get back in line.

The next question comes from Carl Johan Bonnevir from DNB Markets. Please go ahead.

Yes, good morning Marcus and Petter. Just to continue on the last answer, Petter, when you look at the retroactive payments in this quarter compared to the similar quarter last year, the ones you detailed sounded like it was basically at the same level that was affecting you this year as last year. What's the different interpretation I should make to it?

If you look at this, particularly this quarter, and if you pick the values that we write in the report, in total, it's relatively similar retroactive revenues between the years, as you said. And then there is a variation in preschool and international. There is less than last year's quarter in the upper secondary school. It's more. And roughly they even out.

From group level, it's basically unchanged when you're looking at it. Then, as you said, you're not detailing all of what is coming in as retroactive.

But that what is important to understand the deviation, that's what we write out. And also I clarify again that, and you may already have understood that, but typically if you look for a full year and compare the retroactive revenues in total makes typically very little difference between the years. It's normally fake. No, no, I

appreciate that you detail it to understand the quarterly variability on margins and similar kind of things. Looking at also your comment about adult education and what kind of momentum do you see in the business going into the second half, into Q4 and then like a more high season in this kind of thing?

Q4 is always, as you know, the smallest quarter with the lowest revenue. And we expect the same pattern this year. There is no change. We typically have shorter courses in that quarter and there is also part of the vacation and so let's start there. So no change in expectations from a facing perspective.

And going into the next high season, if I mean it like that, have you added a lot of new programs to keep it going, so to say on the current growth level as well?

We have a good amount of programs, we have good demand and there is an underlying need there in the labor market. So now you can complement also markets if you know, but from what I've seen in the labor market, there is still expectations for the full 2025 of high unemployment chips. So based on that such data, if that continues, we would estimate that the coming year, we have the fundamentals for that, after the summer we will continue to be strong. I think the key question is what will happen after that with unemployment rate.

And then you have the election year 2026 and the ordinary pattern is that the politician and the parliament invest more in education and election year. And this year we also have unemployment and I think they will continue to invest more when it comes to what we call yrkeshögskola. So the market will grow and what we want to achieve is of course to grow with the market and maybe even try to take some market share. So if it follows the ordinary pattern, we should have a good season the coming one and a half year.

Thank you very much. And looking at the school voucher indications that you now given the report, how do you see those playing out when it comes to the cost inflation that you see?

Yeah, as you know, we had low index stations of rents, .6% about, which is good. Of course, it comes down to the salary, expected salary increases and the major revisions we have in Sweden are in September. But generally speaking, we consider this to be neutral and the cost compensated wise.

And I guess looking at Norway, we're also looking at slightly higher probably wage negotiations than we do in Sweden. So should you see balance in Norway as well?

Yeah, but we have also higher voucher increase of this. We expect to be balanced.

Good to hear. And just pick your brain a little as well on the margin target, given the 7 to 8%, given that you're now going for more of an international growth that's hitting that 50% target. Do you still feel the 7 to 8% is a valid target or is that something that probably is going to be slightly more delayed due to the international expansion and maybe the focus on that being in say lower margin preschools?

No, we still see that the margin 7 to 8% to be valid. And part of the, while of course that segment in general has a lower margin than the other segments, we can one conclude that we already are within that margin target in the Swedish preschool operation. And that is the operation which we have been able to develop for the longest time of course and learn how to optimize. We see that there is further possibilities to further improve our margins and operational efficiencies in international operation. And while we want to grow internationally, we also spend the resources to improve the efficiency.

Excellent. Well, thank you very much and all the best out there. Thank you.

Yes, maybe just a short remark on the acquisitions that we make. They are on the target level. Yeah, that's good to mention. So when we make this sort of acquisition international, they will of course support the target.

More questions at this time. So I hand the conference back to the speakers for any closing comments.

So thank you very much for your time and we wish you all a good day. Thank you.