Arjo AB (publ)

Thank you and good afternoon to everyone and welcome to RDU Q1 2025 earnings call. With me here today, as you heard, I have Christoffer Karlsson, our Interim CFO. We will give you some details on the Q1 report that we released an hour ago. The agenda looks as usual and includes a summary of activities and results from Q1, the balance sheet items and the outlook for 2025 before we open up for questions. We intend to keep this call to an hour and finish no later than 4 CET. Next slide, please. We closed the first quarter in a solid way and could see how demand continued in the quarter with stronger organic growth than in quarter four. We had continued strong momentum for our rental and service business and now also supported by growth in our capital sales. We see improved market condition in some more European countries and North America stay on good growth levels. And we closed the quarter with 3.4% organic net sales growth. And in addition, as a positive sign for the rest of 2025, this net sales development is supported by an even stronger order intake growth. In our largest market US, We continue to see a positive development, and this is probably related to a combination of our internal effort to create a more focused US sales organization, as well as the financial situation and stock shortages are improving among our customers. In global sales, the net sales growth improved sequentially from quarter four. We are now seeing improving market conditions in some more European countries. We continue to see growth in UK. Dash and Benelux performed very well in the quarter, and it's encouraging to see that the bounce back in Benelux, which drew sales double digit in quarter one. Our gross margin came in at 43.7%, a slight improvement versus last year's 43.5%. We continue to get support from lower material costs and price adjustments, while these improvements are partly offset by higher salary cost and currency headwind. For the rest of 2025, we will continue our work to drive efficiency focus throughout the value chain, based on the plans that we have put in place, for example, within our supply chain organization. Our focus on price adjustments will obviously also remain there to secure compensation for mainly higher than normal salary inflation. On the OPEC side, we are seeing an increase mainly related to salary costs. We continue in the quarter to invest where we expect to drive profitable growth for the future. Adjusted EBITDA for the quarter was 486 million SEK versus 502 million SEK in quarter one last year, a reduction coming from currency headwinds. Neutralized for currency headwind, the adjusted EBITDA would have increased with 30 million SEK, which is approximately a 6% improvement from the underlying business. Our operational cash flow came in at 184 million, leading to a cash conversion of 41% for the quarter. For those knowing our business, you know that quarter one is from a seasonality perspective, a weaker cash flow and cash conversion quarter. it will gradually improve over the year and we continue to be committed to our 80 cash conversion target in summary we are delivering the first quarter of 2025 in a stable way under our underlying business develops in a solid way and we can see how our business model with capital rental and service is helping us to deliver stability in growth and underlying earnings trends In addition to this, we see several important markets showing good signs of increased activity level and demand for our products and solutions. We now have two quarters in a row with higher order intake than sales, and we are building our order book stronger for the quarters to come. Next slide, please. Our North America business grew with more than 6% organically in the quarter. We had a continued very strong development in Canada, where service, rental and capital all developed well. It is especially our long-term care business in Canada that is driving the growth with good profitability levels. In our largest market, US, we have a continued positive development also in this quarter. The growth in US in the quarter was seen across our product categories. Rental and service continues to drive growth and is developing well. On the capital side, demand is coming back, and it's driven by our important patient handling category. While DVT was declining in the quarter, but should from next quarter have easier come after the HA customer account phase-out last year. Then over to Western Europe and rest of the world that make up the global sales region. In quarter one, this region grew with plus 1.4%. which is a sequential improvement from quarter four flat this growth development. In Western Europe, the situation seems to improve with higher activity level in the market and increased order intake and net sales for our capital products. Our important French market is still weak in quarter one sales, but order intake is growing, showing some positive signs for coming quarters also for this market. Countries with good demand and strong organic net sales growth in the quarter was, for example, Germany, Netherlands and Belgium. UK is continuing to grow in quarter one, but a lower level than the catch-up effect we could see in quarter four. Our service and rental business in Western Europe also developed well in the quarter. With improved sales growth and even higher order intake in Western Europe, we see good signs for the coming quarter in this region. Our business in rest of the world had a negative organic net sales growth of minus 5.7% in the quarter. And this is due to very tough comparison from last year when the growth was plus 11%. Our APEC region couldn't repeat last year's very strong sales in quarter one, where we had major deliveries of capital equipment in Singapore and Hong Kong. With this said, Australia is, however, standing out and growing double digit in the quarter. India develops well also in this quarter, with good potential for further development in the coming quarters. Next slide, please. Our gross margin came in at 43.7%, a slight improvement versus last year, 43.5%. We continue to get support from lower material costs and price adjustments, while these improvements are partly offset by higher salary costs and currency headwinds. In the quarter, the stronger growth in North America also contributed to a positive geomix effect. We are, as before, working hard to mitigate the headwinds coming from increased salaries with continued long-term efficiency gained throughout the value chain, including solid focus on continued supply chain efficiencies. We need to continue to work on price adjustments as one part of the puzzle to mitigate further inflationary pressures. This work is now also intensified and aligned with any impact from the tariffs coming into play from quarter two. Next slide, please. Adjusted EBIT in quarter one declined versus last year, only due to significant currency headwind. Neutralized for currency impact, EBIT would have been improving, showing a stable and improving underlying business. On the OPEC side, we are seeing an increase mainly related to salary costs. We continue to invest where we expect to drive profitable growth for the future. But with this said, I'm not satisfied with the level of operating expenses increased in the quarter, and we will further accelerate efficiency activities for our operating We had a negative effect from revaluation of AR and AP of minus 34 million in the quarter, booked under other expenses. This was positive plus 8 million in the same quarter last year. Adjusted EBITDA for the quarter was 486 million SEK versus the 502 million SEK in quarter one last year. A reduction coming from currency headwind. Neutralized for currency headwind, the adjusted EBITDA would have increased with 30 million CET, which is approximately a 6% improvement from underlying business. Restructuring costs came in at minus 40 million in the quarter, mainly related to changes in the executive team and our change of go-to-market approach in China, as well as some integration costs related to last year's acquisitions. Next slide, please. And here I hand over to our Interim CFO, Christoffer Karlsson.

Thank you, Niklas. Q1 followed the pattern that we usually see with lower operating cash flow due to some seasonal variance. Cash flow effect from working capital is typically negative in the first quarter. And in Q1 this year, it was minus 180 million SEK versus 141 million SEK in Q1 2024. The variance compared to Q1 24 is primarily driven by an inventory build-up due to the good order book and upcoming rental investments. Working capital days decreased to 81 days in the quarter versus 84 days at year-end 2024. The working capital and closing balance is heavily impacted by the FX development, which has strengthened SEC, especially against USD. A constant FX rate at December 24 and the working capital days is plus four days in the quarter, amounting to 88 days by the end of Q1 2025, primarily driven by the inventory build-up. The lower profitability, together with the negative impact from working capital, gives an operating cash flow of 184 million SEK for the quarter, versus 256 million in Q1 2024. As an effect of this, cash conversion came in at 41.3%, for the quarter versus 54.2 last year. As I stated earlier, our cash flow is typically weaker in the first quarter of the year, and we're still aiming for the full year target of 80% cash conversion in 2025. For your information, cash flow from investing activities was minus 250 million SEK versus 141 million SEK in Q1 2024. The increased investments are mainly related to investment in our rental fleet, which are 42 million SEK higher this quarter than last year. Next slide, please. Our net debt increased slightly during the quarter from 4.2 billion in Q4-24 to 4.3 billion in Q1-25. This increase is mainly attributed to lower cash flow in the period. Our financial net in the quarter is more or less flat compared to last year, but we have lower interest costs, which have been offset by the reduced positive FX fix quarter over quarter. The interest net was also significantly flat in Q1 versus Q4 2024. Currently, we have lower interest rate versus a year ago. And if the interest rates continue on the same level, we will see improvements year-over-year in both Q2 and Q3. And we expect our net debt to decline in the coming quarters. Our cash position remains strong. Our leveraged net debt to adjusted EBITDA had a normal seasonal increase and came in at 2.1 versus 2.0 at year-end. The equity rate came in unchanged at 51.2% versus the year-end. Next slide, please. With the current geopolitical landscape, we also want to take the opportunity to briefly clarify our exposure to potential US tariffs. One important message is that 40% of our US revenue is coming from service and rental business, which in nature is domestic and not impacted directly by tariffs. And to be clear, when we're talking about service business in this context, Spare part sales are not included in the 40%. The capital sales and spare part sales is coming from product produced in our factories outside US. The vast majority is coming from Poland, 20%, the main republic, 20%, and Canada, 10%, followed by China and UK with 5% respectively. We are working actively with many different mitigation activities, which includes but are not limited to price increases to customers, change flows with our manufacturing footprint, and other changes to our operational setup. Then I hand it back to you, Niklas.

Thank you, Christoffer. I'm very happy to be able to share that we have now officially launched our Maximo 5 floor lift, which is a key product for our important patient handling category. This new generation of one of Ardu's best-selling products enables safe and efficient patient transfers. New features include the new ArduMotion Assist operated via touch sensors and reacting to the caregiver push, pull, and other motions to enable efficient and controlled and intuitive transfers with a minimal effort for the caregiver. A recent independent study showed that the maximum five reduces the accumulated forces required by the care caregiver to complete the patient transfer by almost 70% compared to competitor devices. We are launching this lift in approximately 40 countries during this year, and it means that we now have two global launches in two important product categories in 2025, since we launched a new premium bath system Symbliss earlier this year. During the second half of this year, we will continue and we will have one more launch a new product in our important pressure in your prevention category. Next slide please. Our outlook for 2025 is that the organic net sales growth will be well within the groups targeting the well of three to five percent. With that, I would like to summarize today's telco. We see continued healthy growth in quarter one, with a strengthened order book and gross margin expansion. Our profitability is quite significantly impacted by negative currency effects, but the underlying business continues to develop in a good way. We strengthen our market positions with two new products brought to market, something that we are really excited about and will increase our discussions with customers going forward. We monitor the geopolitical situation closely, and are preparing a number of measures to limit impact from US tariffs. And finally, our outlook remains unchanged for 2025. So with that, we can open up for questions. So moderator, please go ahead.