Arjo AB (publ)

Thank you very much everybody that have called in to this Q4 year-end report 2025. My name is Andreas Elgård and with me today I have Christoffer Karlsson and I will start the meeting and then we'll hand over to Christoffer when we come into the financial figures and we'll do this together. So before we begin, I mean, I've started now in Arjo since three plus weeks back. So I'm still new at work and I'm super excited to lead this first call and also to share a little bit with you guys what I'm experiencing as a new entrepreneur. person discovering Arjo. And I thought also that maybe it's a good idea that there could be some newcomers to this call who are interested in getting to know Arjo a little bit. So just very, very briefly, we are experts in improving mobility in acute care and long-term care settings. Our products truly make a difference when people are at their most vulnerable. They provide safety, dignity, and integrity to patients, and they also provide good working conditions for the caregivers. And of course, they deliver value to the clinics and to the institutions where they are in use. Arjo is founded in the south of Sweden in Eslöv by Anna Johansson. That's also where the name comes from. It has a long tradition leading up to where we are today. An 11 billion company with almost 7,000 co-workers and with active sales in 100 plus countries. I think we can take the next slide. And you know, when you're new, of course, you discover the company, and I discover Arjo through all the products and our business, but mainly I discover it through the lens of all of our people. And we have a very, I would say, rich company in terms of diversity. We have many businesses. We are active across many countries, and we have many versions of Arjo out there. And it's really... the people that represent these different versions. So a lot of diversity across Arjo. We're not always using that to our benefit to drive maybe best practice or learn from successes or failures. But there is one thing that we have in common across Arjo and was a big reason for why I wanted to join as well. And that's we're all connected and really I would say passionate about the purpose and it is the purpose of doing good to be there when patients are at their most vulnerable situations and provide products that truly help the care situation. I already said it, but integrity, dignity are super important when you are in this position and also to provide that in a safe way. So it is something that is truly a superpower in Arjo and something we will build on for the future. So let's talk about Q4. So first of all, I would say that we had stable demand throughout the quarter. And then towards the end of the quarter, we saw maybe not the development that we would have wished. We are being challenged by, of course, currency and tariffs. And we have also been challenged a little bit on price pressure in parts of our markets and in the mix where we're selling, where we have slightly higher growth in markets with lower margin versus markets with a little bit higher margin. But overall, healthy organic growth, very strong cash flow in the quarter. So we almost hit our yearly cash conversion targets, but really, really strong in the quarter. And of course, we had hoped for more when it comes to the gross margin and maybe some of our cost controls. We can look a little bit into the full year. So when we zoom out and look at the full year, we see a growth figure that is within the range that we have promised. And we can see that we deliver this despite being challenged, I would say, mainly in UK, where we all know that the market in UK and the political situation, the struggles in the healthcare system in UK is also something that hits Argo and has been a red thread throughout the year. That is impacting our performance, I would say. And then the headwinds in terms of tariffs and currency together with price pressure in parts of our range. And then the mix is challenging our profitability and our margin. All in all, our EBITDA, we expect a little bit more from the quarter, but if you look at the full year, given the adjustments that have been throughout the year, some of the write-offs, this is the level that we landed on. As I mentioned previously, thanks to the strong performance in the Q4, we managed to almost come up in line with our target of 80% cash conversion. We are just south of that. And then very important to highlight is that we propose to stick to the same level of dividend that we had last year. And the board is recommending to the AGM a dividend of 0.95%. Just very briefly on North America and global sales, the two segments that we have, you can see that the quarter in North America was slowed down a little bit, but looking at the full year, it was quite strong growth. And looking then at global sales, we had the reverse trend where we had a stronger finish and a full year that was more, I would say, stable. And important to note this is that some of the more emerging markets in what we call rest of the world have high growth. And that's also areas where we have growth. a slightly different profitability, gross profit level. And that hits the overall gross profit of approximately 1%, and then tariffs, currency, et cetera, is approximately another percent when you look at us from the outside and compare with last year. And by that, I think it's time to hand over to Gustaf.

Thank you, Andreas. Yes, my name is Christopher Karlsson. I'm the CFO of RU. As Andreas mentioned, profitability was a challenge in the quarter. Our gross margin came in at 42.1% compared to last year's 44.7%. We continue to have headwinds from currency and US tariff, representing around one percentage point of the drop. In addition, one percentage point can be explained by the unfavorable geo and product mix due to higher sales in global sales with higher volumes of medical beds. On top of this, the DNA flu season in US pressured our rental margins. And we also saw impact from continued price pressure in the DVT business in the US in the quarter. Meanwhile, we had a good momentum and margin development in the rental business in continental Europe, especially France, Germany, and Italy in the quarter. However, the market condition in UK continued to be a challenge And the 11 percentage point drop in UK sales consequently had a negative impact on the gross profit and offsetting the positive effect from continental Europe. All in all, a disappointing finish to the year from a gross margin perspective, where we did not have a seasonal uptick that we usually see due to a number of headwinds. Next slide, please. Adjusted EBIT in Q4 came in at 249 million SEC versus 375. The main driver is the drop in gross profit and an OPEX increase of 23 million SEC. We had a negative effect from revaluation of accounts receivable and accounts payable of 3 million in a quarter, booked under other operating expenses. And this was plus 19 in the same quarter last year, resulting in a delta of 22 million SEK year over year. Total FX impact on adjusted EBIT amounted 73 million SEK in the quarter. The even margin decreased to 8.9% versus 12.5% last year. On the OPEX side, the increase in the quarter is mainly driven by higher sales of capital sales in the US, resulting in higher GPO fees and sales commission. The organic OPEX increase was 1.9% in the quarter, which means that adjusted for the variable cost, we see a good traction from the cost efficiency initiative implemented early in this year. Adjusted EBITDA for the quarter was 526 million SEK versus 653 million SEK in Q4 last year. The adjusted EBIT margin decreased with 3.2 percentage point versus last year. Restruction costs came in at 68 million SEK in the quarter, where 35 million is a write-on of capitalized IT costs related to an ongoing IT harmonization program. This initiative is expected to lead to annual savings of at least 30 million SEK from 2028 and onwards. Another 33 million related to ongoing improvements in our global sales structure to improve the cost and situation for the future. Next slide, please. Operating cash flow continued to improve in the quarter amounting to 600 million SEK This was 121 million SEK higher year over year, primarily due to inventory reduction and a good receivable collection. The decrease in inventory is significant in the quarter, and it turns also to the full year number into a positive number. Our increased capital sales together with the supply chain inventory reduction program is now starting to show results. Working capital days decreased to 76, down from 82 in Q3. And it's good to see a continued positive trend here. The working capital improvement is also the driver for improved operating cash flow of 600 million SEK in the quarter. Consequently, cash conversion in the quarter was almost 120% compared to 82% last year. For the full year, we came in at 79%, which is in line with our target of 80%, and an increase versus 2024. For reference, cash flow from investing activities was 172 million SEK compared to 191 million SEK in Q4-24. The decrease is mainly due to 23 million lower investment in tangible assets. This quarter includes 19 million SEK investment in a Dutch entity Simicare, which was announced in the Q3 report. Next slide. The decrease in net debt in this quarter is mainly due to the improved operating cash flow. Our financial net came in at minus 77 million SEK, which includes a non-cash flow impact of 35 million SEK. Negative revaluation of our holdings in Atlas, Infonomy and Replus. Adjusted for this revaluation of our financial assets, the financial net was minus 42 million SEK and on par with last year. Our cash position remains strong. Net debt to adjust the EBITDA stayed flat versus Q3, easier and came in at 2.2. Our equity rate stood at 49.8%, up from 49.5% in Q3, mainly due to the improved cash flow. With that, I will hand it back to you, Andreas. Thanks, Kristoffer.

So let's look ahead. How will we define our future direction? And I would like to say that, I mean, there's always ongoing positive work in preparing for the future. During 25, we launched the Maximum 5 that many customers think is really a game changer. We have just recently also launched the new hygiene solution, Simblis, that has received a lot of positive acclaim so far. And we're going to continue to rejuvenate our offer and how we go to market going forward. But maybe just a few words on what it means to work on this. So we have a solid foundation to build on. We have a macro solution. economics, I would say, or trends that are incredibly positive for us, which is people live longer, more people come out of poverty. The need for care is growing faster than the population is growing and the GDP is growing. So from a macro perspective, all things are positive. At the same time, we know also that many political systems and many healthcare systems are set under pressure because it is difficult to keep up with the growing need of care. So there are changes in how care is being administered and given to patients. All of these things will create a more dynamic market in the future, and it's very important for Arjo to set our point of view on that. Part of our foundation is also that we have a very passionate team dedicated and committed to the purpose of doing good for our patients and caregivers. So that said, there's also a lot of things that Arjo can do that is not about the macro, that is not about the patients, but that is about our own performance. And there's significant opportunity across Arjo to share best practice and learn by that and implement going forward and use decide on the future in order to be able to take out maybe costs and drive efficiency. So we can look at the next slide. So how do we realize our potential? Part of that is to know where we're going and setting a strategy, setting a direction. And we intend to present this back to the market in the second half of this year. The work has already started and we'll bring together leaders from all parts of Arjo. We are going to workshop with them and decide on where we want to go for the future, how we will get there, what to prioritize, what not to do, which markets to have focus on, which parts of our product portfolio to put emphasis on, and if needed, acquire additional capability, additional market position, or maybe additional portfolio offerings. And those things are all easier when you have clarity in your strategic direction. And I think that for Arjo, the last time we set a strategy was back in end of 2019. So we are due to create that clarity for ourselves and for all our shareholders. We, the only outlook that we give right now is of course the usual one about three to 5%. And we are really looking forward to presenting our future direction. And with that also update the financial targets in the second half of 2026. So that's what you can expect from us during this year. And by that, I think we are at the Q&A.