AcadeMedia AB (publ)

Welcome to the Acaday Media Q4 Report 2024-2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Marcus Strumberg and CFO Peter Sylvan. Please go ahead.

So good morning everybody and thank you very much for your time and we will spend now a few minutes to introduce you and present our Q4 report and it will be me, Marcus and Petter that will make this presentation. And this time of the year is really a great year for time for Academedia. We meet a lot of new students, we start our schools, it's a very exciting and very good time. and when we sum up this year we can say that we have had a very good a very stable development in academia during 24 25 and the end of the year q4 was in the same line as overall this year we have kept on growing we had made a lot of international expansion all the segments are developing in a positive way and that is very positive also when we look into the future. we have also focused on quality and we have made a lot of investment also handed the demographic challenges in our mature markets and when we look at the preschool where we have entered swimming lessons for free we are traffic lessons for free a lot of focus on reading and all of these quality efforts had created this growth When we look at the number of students has grown about 7% the year we have behind us. And when we look at the start, we think that the start of this new school year has also been very stable with the growth of around 3%. When we look now at this year, the board also will propose an increased dividend to 225 krona per share and the board also intend to propose a voluntary share redemption program or buyback program to the annual meeting that will be in November. And we also want to highlight some of our quality efforts and we look at specific on the reading. So in sweden we measure the results in when they are at level three but we have focus on year and level one and if we look at this number our early efforts our training programs on the teachers our focus on new methods has really improved the way that the children learn how to read and when we look at the numbers now of course we have the target to achieve 100 but we are now at 90 of the children in first grade that can read and that is a good step for us and we attempt to continue this development And if you look at Academedia, so a lot of company talks about the future, we could also show our history. And to have focus on stability, to grow profitability, to increase the profit, to make the company more stable, that has really been core for us. And as we look at this number, we have increased 90% carg EBIT over these years. And one important strategy for us is to continue to develop the international part of Academedia. And we have announced this target that it should be 50% of the revenue that should be outside Sweden including the adult education. And we made two acquisitions just before summer. both in Germany and in the Netherlands. And we think that we have a good list of prospects. We have a strong balance sheet that we could continue to grow and go aboard this target. And with this introduction, I also want to comment a little bit about politics and We are very used to handle the politics situation in the different countries, both in Finland and Norway and Germany and so on. And this is a picture that just shows the situation in Sweden, because we have had a lot of different proposals. I think it's around 10 proposals that is on the table for the government in Sweden now. And it's three proposals that is focused on the situation that we are in independent sectors. It is the profit inquiry, it is the school voucher inquiry, and it's also the principle of publicity to be more transparent as a sector. And if we look at these three, we have made a picture that tries to explain where in the political phase is these different inquiries. And if we look at the first one, We are just after the phase that we have had the information for what has been the comments from different sort of organization. And now it's about to be negotiated. And we think that the profit inquiry will have a proposal to the government around springtime 2026. That is our best guess for the moment. If we look at the school voucher, we are not still in this consolation phase. So it's nothing new information to talk about. And it's very important also to say that even if the government will talk about the profit inquiry during the spring, it will be operating in 2028. So the timetable in these inquiries are quite long. And we can see the same, we have also commented on the principles of publicity, and here we also are in the same phase as the profit inquiry. So it's a long process, it takes a lot of time, and some of these, we think, will be proposed to the government and parliament in the spring. And we could answer some questions if you have any questions around this after Petter's presentation.

Okay, thank you, Marcus. Good morning, everyone. I will talk about the financial development. And as Marcus started to explain earlier, we achieved a good growth of 5.4%. And this is with contributions from the acquisitions, yes, in the Netherlands, amounting to 1.1%. additionally our adjusted profit margin increased to 9.1 percent compared to last year 8.5 percent reaching 467 million in absolute terms up from 415 million and finally this increased profit has translated into higher free cash flow So let's continue and turn to the next page. The improved adjusted EBIT are evident across all segments. And in the preschool and international segment, the increase of 19 million is driven by positive contribution from the mentioned acquisition of YES. In the compulsory and upper secondary segment, we have a stable situation. And in adult education, continued to report strong results driven by high unemployment rate, and in particular, increased volumes in higher vocational educations. So that's the total overview. Let's jump to page 11 and look at the quarter's development within each segment. And we start with the preschool and international segment. The number here of children increased by 6.5%. Our growth was primarily driven by new preschool openings in Germany. The international operation account now for approximately 30% of the group's total sales. The net sales increased by 4.5% compared to last year's, and we had an organic growth of 5.18%. The difference there is the currency effect. Adjusted EBIT and margin increased compared to the previous year. This year's margins 8.6% was up from last year 8%. The adjusted operated profit increased to 169 million compared to last year's 151. And the improved result was mainly positive effect from the acquisition of JAS in the Netherlands as well as more children and higher compensation in Germany. Move on to the compulsory school on page 12. We now note a 4.8% increase in student numbers. Net sales rose by 9.7% driven by increased number of students and the positive impact of the annual school voucher revision. Adjusted EBIT and margin increased compared to the previous year. This year's margin reached 9.5% up from last year's 9.1% and the operating profit was 140 million compared to last year's 99%. The result and margin for the quarter were positively affected by acquisitions and expansion units. now we turn to upper secondary school on the next page and we there observe a 0.16 increase in student numbers the sales grow by 2.7 percent and this was driven by more students as well as the annual voucher revision the adjusted margin was stable and last year 12.2 percent is maintained this year and we last segment move on to the adult education page 14 and there is a 7.3% increase in sales and this is attributed to a high number of students in higher vocational education in particular. Adjusted EBIT increased to 34 million from previous year that was 23 and with a margin of 7.5% compared to 5.4% last year. The improvements in result was mainly attributable to increased volumes in higher vocational education. And service conducted by SCB, the Swedish Statistic Bureau, indicate that the unemployment rate in Sweden was 9% in May, which is historically high and is expected to maintain high at time being. The growth here is highly correlated to a higher unemployment rate in this segment. Okay, let's continue to page 16 and free cash flow and investments. Free cash flow for the last 12 months was closed the last year in absolute terms. The free cash flow as a percentage of EBITDA 62%. And the lower ratio compared to last year is mainly an effect of a change in network capital. The last four years, maintenance capitex as a percentage of sales, as we see in the picture to the right, has declined. This is a consequence of fewer new openings and fewer expansion units. Proceed to page 17, the financial position. Net debt excluding IFRS 16 decreased by 67 million compared to last year with leverage ratio excluding IFRS 16 as 0.5. Obviously well below the financial target of less than 3. And even including property-related lease liabilities, the net debt including is lower than last year. And this is due to low indexation, low number of new entry contracts in the quarter and FX effects. In the period, new loan agreements were signed with three banks, securing financing until 2028 with the possibility to extend until 2030. Obtaining long-term financing is essential for Academedia to successfully pursue its acquisition strategy that Markus talked about. This approach aligns with our objective to secure 50% of revenues from other sources than the Swedish school voucher. Okay, let's continue to the next page. and we now look at the overview of a full year and for the full year we achieve a good growth of 9.7 percent with contributions from the acquisitions amounting to 4.7 percent Additionally, our adjusted profit margin increased to 6.7% compared to last year's 6.3%, reaching 1.281 billion Swedish krona in absolute terms. And this is up from 1.097 billion Swedish krona. And all segments contributed to the improvement of operating margin and profits. And now turning to the next page and the full year's results visually. As I mentioned, the improved adjusted habits are evident across all segments. In the preschool and international segment, the increase of 57 million is driven by new openings and acquisitions, along with better school voucher compensation in Germany. And in the compulsory school, there has been a stable development with increase of EBIT 27 million, driven by contributions from the acquisition and expansion units. The upper secondary school has managed to increase its capital utilization and improve its cost control, leading to an improved EBIT of 47 million. And adult education finally improved by 54 million, and this was mostly driven by higher volumes in vocational education. And finally, on the next page, our financial performance against targets. Our organic growth, including small bulk acquisitions, stands at 9.2%, exceeding our financial target of 5% to 7% growth. Our adjusted debit margin of 6.7% falls below the target range of 7% to 8%, but we are slowly improving, rolling 12%, and are getting closer to our target. The leverage ratio of 0.5 remains well below the required threshold of 3 and leaves further rooms for acquisitions when opportunities occurs, as long as share redemption and or buyback programs. And with these words, I end the presentation and we open up for 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 Johan Lankvist Sundian from DNB Carnegie. Please go ahead.

Hi, Marcus and Petter. Thank you for taking my questions.

Hello.

First one. Hello. First one, it's on the adult business. And you highlighted in the representation the project, the unemployment rate in Sweden for the coming year. Can you give some kind of guidance or comment about your visibility on volumes and what that impact can have on margins during, say, the coming six to nine, 12 months?

I mean, we don't give any forecast overall, but there is public data that you can also take part of that the unemployment rate is expected to be on similar levels for the coming year. And that should be, yeah, everything equal should be equally positive compared to the year that we have had. So we don't see any major factors that are negative to the segment for the coming business year. The general statement, from the margin perspective, we come from a year where we have significantly ramped up the volume, not the least in the education. And we are at a historically very high margin. on the 12% last year, which is a bit higher than the expected range of 9-11%. And of course, if we would continue to have high volumes given by high unemployment rate, I think that correlates to continuous high margins. But on the other hand, it's probably not sustainable to be at this high level, like 12%. over time even though they're high in product rate because we often have needs to secure the quality which always increase additional cost of investment when we ramp up relatively quickly.

I understand and if you go back to you had to start with the financial targets and you you have pushed towards your margin target a bit during this year. What is needed to be achieved to reach the kind of corridor from where it's done today?

For the financial targets, all targets are you meaning? Margin specifically. Margin specifically. Generally speaking, as many of you probably know for the four segments we have three of the segments are within the margin range seven to eight percent or higher I mean adult education is higher and compulsory school is at seven percent and or slightly higher and the secondary, upper secondary school is a little bit above 8%. So, I mean, all of these are up or higher at the range and they need to sustain the margin. I mean, it's positive also if they slightly can improve the margin, but we don't necessarily expect them to contribute that much. The main changes that is needed is continuous improved margin in the preschool and international segment. and we have a slight improvement this year that has been behind us. It would have improved further if it wouldn't have been that we had added the acquisition of Tula that came in with a lower margin. We have a margin improvement in the segment in Tula in this last year, but still they are lower than the rest of the state. So it continues up to the year to come in the pre-schooling international that this is a necessity to reach our money goal.

And specifically with the Finnish acquisition you referred to where you are working to improve margins. Where are you in the progress of improving margins. Are you halfway done or if you're just a ballpark?

We are kind of halfway.

And the other half, is that a quick fix or will it take many years to achieve?

We happen to reach the full segment margin potential within perhaps two years or so.

Perfect. My final topic is the kind of buyback or redemption comment in the report. Is there any kind of ballpark range that has been discussed? Do you think the last year's levels are a good kind of level to look at or Will the kind of volume of the program be significantly different compared to what we've seen last years?

So we don't obviously give any specific guidance at the time being, but we can conclude that the cash flow at the time, the cash flow for the year that has been, has been strong, despite all that positions were made according to our specific agenda, and despite the dividend we made on the share back pay program the last year, and we end up with a net leverage position that is even stronger than the year before. So, I mean, we have a have good we have good start in the year to come we have a plan for continuous growth according to our financial target and there is nothing changed in our cash flow generation model so with all that said i mean we have all the possibilities to either have a similar size or better in the share back or redemption program combined with an acquisition agenda that we find decent or have a more aggressive acquisition agenda than we had the year before. So it's either way.

What would dictate if you would go for a redemption or buyback program?

That's a good question. We have had good use of the redemption program the last two years. and we have achieved many of the objectives we wanted with this redemption program. But we have had the revelation and discussion in the board the last half year or so of the pros and cons of continue with the redemption program and the pros and cons with the alternative buyback program. And we see see positive uh advantages of both solutions and for us the redemption program has been proven but on the other hand we see a favorable uh mechanism in the share buyback program that we are evaluating and uh yeah we need to come to one conclusion in the board and then for the proposal from the board to the annual general meeting for which one we find most favorable in our situation and we take a number of factors into account of transparency to the market the value that we have of providing a premium that we have in the redemption program you don't typically do that in the share buyback program and value that point just again the higher flexibility in terms of timing and frequency that we can do in a shared Bible program.

Thanks for the color. I look forward to hear the conclusions. I'll get back in line. Thanks.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Perfect. Thank you very much for taking my questions. I have one or two here, or potentially three, but just to follow up on the Finnish business and the acquisition of Tula, I appreciate that the margins are expected to improve gradually, but you're right that there was an accentuated seasonal effect in the quarter. Would you care to just explain that and what happened and what you see going forward, please?

You mean the seasonal effect specifically for Tula, or what is your question?

Yeah, exactly. So what was the accentuated seasonal effect? You write that in the report, just why was that and what happened?

Okay, so it's for comparison reason that for last year they weren't, we required them in March, I think, in 2024, so they weren't part of the full year. That's what we mean.

Okay, sorry, then I misinterpreted. Perfect. And then just on geographies, do you see any kind of possibility of new countries adding new geographies in the coming years? What's your comment on that moving forward?

So you could say that our focus now is to grow the German business, to be the leading private operator in Germany, and we are quite at a good track for the moment. In the Netherlands, we will do more acquisitions when it comes to preschools, but we are also looking into adult education and also schools. And if we talk about other countries, we have mentioned two, and that is UK and that is also Poland. And we are running adult education in Liverpool and in Warsaw for the moment, but we also want to run schools. So if we talk about other countries, our main focus is Poland and UK.

Perfect. That was everything for me. Thank you very much.

Thank you.

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

Perfect. Thank you very much for your questions and your time, and we wish you all a very good day. Thank you very much.