Ambea AB (publ)

Welcome everyone. Today we will review Ambea's performance for the third quarter of 2024. My name is Mark Jensen, CEO of Ambea and I'm joined by our CFO Benno Eliasson. Together we will walk you through our results and highlight the key developments during this period. After that I will summarize the quarter and compare to our financial targets before we open for questions. I would like to begin with a brief overview of Ambea. Ambea remains the leading care provider in Sweden, Norway, and Denmark, offering high-quality care and support for over 14,500 care receivers across 950 units. We are delivering care across a wide spectrum of services, including elderly care, disability care, and psychosocial support. Our competency-based approach ensures that every person receives high-quality personalized care. Let's have a brief look at some of the reasons to invest in Ambea. Ambea delivers values to society, and we aspire to be the most attractive investment in the care sector. From a distance, care providers can look somewhat similar, but at a closer look, there are distinct differences, as you see on this slide. Today, I would like to highlight our diversified care portfolio, and with that, balanced risk. With balanced risk, I'm referring to Ambea's diversified portfolio that includes elderly care, disability care, and psychosocial support. Within this portfolio, there is a broad variety of services offered, and for instance, Nytida is offering more than 20 different care services within social care. As our sector is operating in a tax-financed environment, there's always an element of political and regulatory risk. However, I would like to highlight that Ambea has over 450 different municipal clients across three Scandinavian countries. Within current legislation, they are all making their own decisions on how and where to buy care services. Most of our municipal relationships are long lasting. The trust we own through quality delivered according to the agreed contracts. Specialized care services as a complement to the municipality's own offering have been delivered regardless of political shifts, and we focus on lowering risk to a manageable level through our consistent quality processes at adherence to rules and legislation. Quality is our license to operate, so it is constantly top of mind in everything we do. Balance also comes from the fact that we are market leaders in our three countries, Sweden, Norway, and Denmark, a position we have developed and hold through keeping our promises, which includes being fast and transparent in correcting errors when they occur. Signs of a balanced risk profile can also be found in the fact that Ambea delivers stable margins regardless of political shifts and in times of pandemic and high inflation. Let's turn to care quality. Our focus has always been on ensuring a sustainable and competency-based approach to care, which is fundamental to our vision, making the world a better place, one person at a time. Quality ultimately arises in the interaction between care receivers and our employees. We always want to make it easy for employees to do the right thing in any given situation so that they can spend their time on things that creates quality and value. We have a systemic approach to quality and sustainability where we carefully follow up all our units every month. External measurements of care receiver satisfaction are highly objective means of demonstrating the quality of care we provide. This year, our overall result in the Swedish National Board of Health and Welfare's user survey for elderly care receiver satisfaction was 79.8%, an increase of 0.3 percentage points from last year. The residents of eight of our care facilities reported 100% satisfaction. We are incredibly proud of these results, which originates from much dedicated work by our employees. Ambea and Vårdagge believes in transparency and to my knowledge Vårdagge is the only Swedish elderly care operator that on unit level shows the results from the national care receiver satisfaction survey at our website. Here we also describe how we work with constant quality improvements and how the results are handled on unit level. In our quality report you can read more about the survey. Ambea's sustainability ambition remains high across the full ESG remit. Signing up to the science-based targets initiative will help us to align our climate actions with global best practices, demonstrating a strong commitment to reducing greenhouse gas emissions in line with the Paris Agreement. And more on sustainability. On this slide, we have a few examples of social sustainability successes in quarter three, all related to our role as an employer. Being an attractive and inclusive workplace for both current and future employees is very important to us and will become increasingly so. We are therefore very proud that Ambea is now in the top 20 of Sweden's best employers in 17th position in Universum's annual ranking. This is the result of a survey completed across all our Swedish operations. This is our best position ever and a reflection of our strategic focus on creating the conditions for employees to do their best work in often challenging circumstances, as well as focusing on leadership. At all levels of our organization, diversity and inclusion is of paramount importance to us. Everyone should feel welcome and included. In quarter two, we talked about supporting pride in Stockholm, and now in quarter three, we have once again been recognized on the Albright Foundation's green list of listed companies for gender balance in our leadership team. Role modeling from the very top is an important element in demonstrating our commitment to diversity and inclusion. With strong competition for scarce talent in the industry, it's vital that we establish strong employer branch in each market. In Norway, Stendi has recently run a targeted recruitment campaign for individual and family care services, which saw an increase in relevant applications from candidates. Our international footprint allows us to share such best practices across the group. Turning to organic growth. We remain focused on expanding our services to meet the growing demand for care, fueled by an aging population and increasing care needs. In quarter three, we had 1,283 beds and clear pay care places in old management pipeline, most of them in Sweden. The pipeline increased compared to the previous quarter due to our new signed contracts in Nytida and also in Stendi. That added 29 beds to the pipeline. In quarter three, we opened several new care facilities, including two assisted living facilities, each in Nytida and Stendi, with 12, respectively, six new beds. Nytida and Stendi also expanded existing units with nine beds in total. Looking at Ambea as a whole, more units are under construction, positioning us for future growth in the Scandinavian markets. Now let's have a look at acquisitions. Nytida acquired four companies in 2024, expanding our footprint within social care. This is a part of our strategy to strengthen our service offering in social care through qualitative bolt-on acquisitions. In Q3, Nytida acquired Sorbus, adding 22 million SEK in annual net sales. Nytida closed one Bolon acquisition after the quarter ended for care providers, free apps operations in foster homes, HVB homes and assisted living facilities, and thereby adding 180 million SEK in annual net sales. Further Bolon acquisitions are expected in the coming quarters as we continue to identify strategic opportunities for growth. Let's look at total revenue growth. The organic growth showed in the purple bars follows the positive trend we have seen since 2022. The total organic growth in this quarter was 7.2%. We remain positive about our overall growth potential in the coming quarters where volume, service and price mix and also acquisitions are expected to contribute. And now to the highlights of the third quarter. In conclusion, the third quarter of 2024 has been another successful quarter for Ambea, marked by strong financial performance, continued organic growth and improved occupancy as well as a bolt-on acquisition. Net sales increased by 6%, reflecting 7% organic growth across our divisions. Group EBITDA rose by 25%, reaching a margin of 13.4%, a significant improvement compared to last year. This growth is a testament to our strong operational performance, particularly in Vårdag and Stendi, and our continuous investments in leadership, innovation, and care quality. Altid in Denmark continues to see profitability improvements from strengthened operations and overhead cost reductions, and showed positive earnings in the quarter. Our strong cash flow has allowed us to conclude our second share buyback program this year and to invest in further acquisitions. New Theta acquired one company in Q3 and closed one Bolon acquisition after the quarter ended. The acquisitions complement New Theta very well and are in line with our strategy to acquire quality companies contributing positively to our service offering and profitability target. We are pleased that Vårdager once again achieved a strong score that is above the industry average in the National Board of Health and Welfare's annual care receiver survey. And now I will pass the presentation to Benno Eliasson, our CFO, to provide a financial overview of our performance this quarter.

Thank you, Mark. The good organic growth we have seen in the last quarter continues. In Q3, we achieved 6% growth in net sales, largely driven by increased occupancy in our care units and new contracts within contract management. Vardaga, Nytid, and Stendi continued to contribute to the growth, whereas Altiden, Insec, and Clara had a negative growth. Turning to the EBITDA development, this slide shows how the different business areas have contributed to the EBITDA of the group. EBITDA increased by 25%, and our margin improved to 13.4%, driven by strong results in vardaga, Fendi, and positive earnings this quarter in Altiden. The EBITDA margin is two percentage points higher than the same quarter last year, and we are of course satisfied with the positive margin development. Vardagas EBITDA was higher than last year, up 1.9 percentage points, mainly due to higher occupancy. Standard EBITDA increased significantly by 3.5 percentage points, reflecting the benefits of our operational improvement with focus on occupancy and service offerings optimization. As Altiland showed positive earnings this quarter, EBITDA increased by 8.4 percentage points compared to the same quarter last year. Now to the cash flow. Our operating cash flow remains robust with strong cash conversion throughout the quarter, even though the third quarter is, from a seasonal point of view, one of the weakest quarters in the year. The cash flow development over the last quarter reflects the strong EBITDA development. This slide shows the way from the rolling 12 reported EBITDA down to the free cash flow post-tax of $776 million excluding IFR at 16. Free cash flow is 27% higher than the full year 2023 number we reported just three quarters ago. We can here see that we, the last 12 months, have invested 67 million in fixed assets, have paid 155 million in interest and 112 million in taxes. We had a negative effect on working capital of 57 million SEK. Over the time, we think that the working capital contribution to the cash flow will be neutral, which means that the underlying free cash flow are above 800 million SEK. This allowed us to maintain financial flexibility, supporting both dividend payments and strategic investments, including acquisitions and share buybacks, which I will show on the next slide. Here we can see how we have used the generated $776 million in free cash flow. $130 million was distributed to our shareholders as dividend. $90 million was spent on the free acquisition earlier this year. And 431 million SEK was spent on the two share buyback programs. And based on our strong cash flow, we continue to reduce our debt, now rolling 12 by 161 million SEK. And then to the overview of our five business areas. We start, as usual, with Nytida. Sales increased by 5%, which is driven by new operations, as well as higher prices in both contract management and loan management. As an offsetting effect, we had lower occupancy in some parts of the segment, individual and family care, which can be seen as natural fluctuations in demand. To meet the long-term increasing demand for care services, we continue expanding our capacity. Nytida increased their own management pipeline with new beds during the quarter, and Nytida also signed one new assisting living facility with a total of 20 beds. EBITDA was in line with last year at 168 million SEK, and EBITDA margin in the quarter landed at 15.9 and at 13.2, rolling 12. Nytida acquired Sorbis Vårdboende in the beginning of the quarter, adding 22 million SEK in annual net sales. And after the quarter ended, Nytida acquired the care provider Preabs Operations in foster homes and various residential care services, adding another 180 million SEK in annual net sales. Vardaga net sales increased by 11% year-on-year, driven by higher occupancy in our own management units and new contract management units. In own management, net sales increased by 10%. Net sales in Vardaga contract management portfolio increased by 15%, which is the result of commenced operations of previously won tenders. EBITDA amounted to 161 million SEK, which is significantly higher than last year, up 31%, and primarily because of the higher occupancy. The EBITDA increase is also driven by earlier measures related to handing back to rental contracts. Material units showed an improved margin of 14.1% in the quarter, which is 1.6% higher than the average margin for Madagascar's total portfolio. And then turning to Norway for an overview of Stendi. In Stendi, net sales increased by 4% in SEC, but by 11% in local currency, and due to the stable occupancy and better service and price mix. The high demand for care services for children and youth with complex needs remains. In the quarter, Stendi opened two new assisted living facilities and expanded existing units, providing a total of 11 beds, During that same period, eight facilities with a total of 13 beds were closed to better meet future demand. We continue focusing on occupancy and service offerings optimization. EBITDA increased by 33 million to 121 million SEK due to the improved service price mix and operational improvements. Earnings were also positively impacted by seasonal variations stronger than usually. The EBITDA margin in the quarter increased by 3.5 percentage points to 14.4, and the rolling 12 margin increased to 9.4, thanks to the good earning development over the last quarter. And now down to Denmark and Altiden. Net sales in Altiden fell by 2% in SEC, which is currency-driven. Net sales in local currency rose by 1%. The decrease in contract management sales was mainly due to one large elderly care contract that expired in the first quarter. Altiren demonstrated strong profitability improvement during Q3. EBITDA was up 27 million compared to last year, thanks to the continuous structural profitability improvement measures regarding capacity, reduced overhead costs, and organizational adjustments that gained effect. Altiren's increase in EBITDA is also reflected by seasonal variations, even stronger than usually, The third quarter is by far the strongest quarter of the year. EBITDA margin in the quarter was 7.8% and rolling 12. We are still losing money, but we are getting close to break even at EBITDA level. And now to Clara. In Clara, net sales decreased by 11% because of continued weak demand due to the public health care organization's limitations of the use of temporary nurses. This also affects other staffing services. EBITDA decreased by 4 million to 10 million SEK due to the lower net sales, which could not be fully offset by lower costs. EBITDA margin was at 10.6%, which is a satisfied margin given the situation and way above the competitors' starting margins. Clara has a diversified portfolio consisting of different welfare services, for example, different mobile nursing teams and student health services. And this diversity of Clara services and adaptability to change market conditions is our core strength, of course.

And with that, back to you, Mark. Thank you, Benno. To sum up our financial development versus our targets. We aim for an annual growth rate of 8-10%, driven both by organic and acquired growth. Rolling 12 shows solid organic growth, and we will now see more growth from acquisitions, adding to the overall growth level. In terms of profitability, our target is to reach an adjusted EBITDA margin of 9.5% in the medium term. We are currently close to our profitability target with 9.4%, rolling 12, and are on a good path to close the gap to our target. On leverage, we target the net debt to EBITDA ratio below 3.25 times. And as of quarter three, we remain well below this target at 2.0 times, thanks to the strong EBITDA development. These financial targets underscore our commitment to delivering sustainable financial performance while investing in our long-term growth. Free cash flow will be used for bolt-on acquisitions, future dividends according to our policy, for share buybacks, and eventually for debt reduction. In combination, this will ensure that we continue to deliver value to our shareholders. And before we open for questions, I would like to provide an outlook post-Quarter 3, 2024. So looking ahead, Ambea remains focused on achieving sustained growth and profitability. As we move into the final quarter of 2024, we remain optimistic about the future. We expect continued organic growth driven by increased demand for care services, and in quarter four, we plan to open new care homes in Ny Tida and Stendi. Additionally, our ongoing discussions with target companies indicate further possible acquisitions in the coming quarters. We expect the profitability to continue to improve in Altiden, which is an important component to reach our profitability target. And be as well prepared to meet the growing demand for care services. And from my visits to our care homes during the third quarter, I noticed a strong commitment from our employees to continue delivering personalized, high quality and sustainable care. We all look forward to welcome more care receivers in the coming quarters. I owe the entire team my sincere thanks for their dedicated work again this quarter. For the coming quarters, I hope we will have engaged discussions with more municipalities leading to greenfield development of old managed care homes. Society needs it to avoid a care crisis in the near future. And this concludes our presentation and we will now open for questions. So operator, can we have the first question, please?