Arjo AB (publ)

Welcome to the ARJO Q1 presentation for 2026. 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 President and CEO Andreas Elgaard and CFO Christopher Carlson. Please go ahead.

Thanks a lot, and thanks, everybody, for dialing in and listening to ARJO's first quarter of 2026. So we believe we have been able to pull together a stable first quarter, and we're happy to share that with you. And also we will talk a little bit on how we are progressing the work with shaping the future Argo. So just to begin a little bit from my side and to remind everybody of who we are and what we do, because we are really – very purpose-led in everything we do. This is something that is very strong in Argo. We exist and are present at people's most vulnerable moments, and we help them to keep their integrity and dignity and really make sure that they have the best possible situation when they need it the most. As you know, we work across several product segments and categories. So from patient handling and hygiene to medical beds, the mattresses that goes on top, often focused on helping to relieve pressure injuries. We work with VT prevention, diagnostics, and disinfection. So these are our product categories. We are about 7,000 people and with an annual turnover of approximately 11 billion. And we are truly a global company with sales to more than 100 countries. So let me just start by a flyover summary of the first quarter of 2026. So we deliver a solid growth in Q1. 3.8% is within our guidance and it's really driven this year by a positive trend in US in capital sales and strong sales in rest of the world. And also this year, As you saw in Q4, the flu season was not as strong as it usually is for us in the U.S., and that has continued. So this is despite a somewhat weak flu season. So we think this is really a stable result that we deliver. The gross margin is slightly below last year, and we are, of course, put under continual pressure when it comes to currency and the tariffs in the U.S. We are working with trying to compensate this through efficiencies and also to manage our costs in a good way and looking into price adjustments, especially considering the situation that is in West Asia. So still uncertain how this will affect us, but we are preparing for making sure that we manage those effects. So just to also highlight, we had healthy cash flow in the quarter compared to last year. It's an improvement, and it follows the seasonal pattern. So this is also something to mention. The adjusted EBITDA came in at 456 million, and maybe one thing to highlight is that we started in the quarter to work on our future strategy, and we've had very intense work and a lot of engagement across the company, and we are progressing in a really good way. I will come back to this a little bit more towards the end. So if I zoom in a little bit on sales in North America, we had both in Canada and U.S. a really strong end to the quarter, so the month of March was really strong. But in total, I would say that U.S. continued to grow in the quarter, and Canada came in slightly below last year. But they really met some very strong comparable numbers. So all in all, really strong performance is what we have seen, meeting very strong comparable numbers. Of course, when you meet stronger numbers, the percentage growth is, of course, affected. And as I mentioned before, For US, the flu season was not as strong as it usually is, but we compensated that through capital sales in patient handling. If you look at the rest of our sales beyond North America, in Western Europe, we were struggling a little bit, and it's mainly UK that is helping us, not helping us, but that stands for the decline. And most of the markets are performing in a good way, and especially France and Italy had really good performance in the quarter. The rest of the world beyond Europe then and North America was really, really strong, and the growth was really carried through several markets performing, but the shout-outs especially to South Africa that delivered a large medical beds order in their region and i just want to hang on that topic just because it gives some flavor to what we're doing so we have modernized the 36 healthcare facilities in south africa this was a special special product tailored for their needs so 2 300 new more than 2 300 new beds And this was not just, you know, it's a logistic exercise. It's an installation exercise. It needs to be done when it suits the hospital. And it needs to be done with, you know, good margin and good cash conversion. And all of this came to life through really good, strong teamwork from customer to back in supply chain. So by that, I'll hand it over to Christoffer.

Thank you, Andreas. As Andreas stated, we had a stable start of the year. Overall, our gross margin came in at 42.6 compared to last year's 43.7%. Looking at the drivers, the growth in patient handling improved group margins, driven by strong development for our floor lift maximum 5 and ceiling lift. Also, our diagnostic business improved margin, driven by higher volumes and unfavorable sales mix. The rent of business gross margin slightly increased, driven by France, UK, and Australia, while U.S. had a negative development due to weaker flu season and some capital conversion among customers. However, the main part of the gap came from an unfavorable product-in-country mix. impacting the gross margin by minus one percentage point, mainly related to the large medical bed order in South Africa. At the same time, U.S. tariffs had a negative impact of 10 million SEC year over year, representing a 0.4 percentage point decline in gross margin. In addition, FX had a minor negative impact on gross margin, But in absolute numbers, the gross profit had negative FX effects of 123 million SEC. Finally, our service business margin were in line with last year when excluding US tariffs. If we now move on to the EBIT slide. Next slide, please. As you can see, adjusted EBIT in Q1 came in at 190 million SEC compared to 208 million SEC last year. However, when excluding U.S. tariffs and FX, the result is in line with last year. Looking at the costs, OPEX declined in the quarter due to FX effects. At the same time, the organic OPEX increase was 2.8%. In addition, we had a positive effect from re-evaluation of accounts receivable and accounts payable of 3 million SEK in the quarter, reported under other income and expenses. Last year, the equivalent amount was minus 34 million SEC, resulting in a delta of plus 37 million SEC year over year. So, overall, the total FX impact on adjusted EBIT amounts, therefore, to a minor amount of minus 7 million SEC in the quarter. Moving to EBITDA. Adjusted EBITDA for the quarter was 456 compared to 486 million SEC last year. And the adjusted EBITDA margin was in line with last year and came in at 16.9% versus 17.0% last year. The EBIT margin increased to 6.8% versus 5.9% last year. This improvement was supported by lower restructuring costs that came in at minus 6 million SEC in the quarter versus 40 million SEC last year. Now we move over to working capital and cash flow. Next slide, please. Operating cash flow improved in a quarter, amounting to 237 million SEC. This was 53 million SEC higher year over year, mainly due to improved cash flow from working capital. Following a normal seasonal pattern, the change in working capital were minus 142 million SEC versus minus 180. Working capital days increased to 83, up from 81 in Q1-25. Cash conversion in the quarter improved to 52.7% compared to 41.3 last year. For reference, our cash flow from investing activities was minus 135 million SEK compared to minus 215 in Q1-25. The decrease is mainly due to 48 million SEK lower investment in rental assets. If we now move over to the net debt and leverage. Next slide, please. The decrease in net debt this quarter is driven by improved operating cash flow, lower investments, and positive FX effects. Our financial net came in at minus 36 million SEC compared to minus quarter three in Q125. The improvement relates to some positive FX effects. Our cash position remains strong. Net depth to adjusted EV day stayed flat versus year-end and came in at 2.2. Our equity ratio stood at 50.5%, up from 49.8% at year-end 25, mainly due to positive effects in equity. With that, I will now hand it back to you, Andres.

Thanks, Jusofo. So I thought that it would be good maybe to just share a little bit on how the work of shaping the future of Argo is going. And it's too early to reveal anything, but I can still try to give you a flavor on what we're doing. And we put the headline here that it will be a story of untapped potential, because being new now into Argo, soon four months into the role, I see a lot of potential in the people, in our relationships with our suppliers, and in the relationships with our customers. It's not just an industry that has healthy growth expectations, but it also argues an organization that's really filled with potential. But in order to be able to untap that, we really need to have clarity on where we're going and make sure that we build the capability to execute as well. And so one way of doing that is by inviting leaders from across the organization to make sure that we build a common ground, we create alignment, we create understanding on where we are and where we need to be in the future. And by doing that, you don't just get the strategy that comes from the top. You get the strategy that is well anchored across the organization. And that really helps you when it's time for execution. So our ambition is to go from strategizing straight into execution. That is the ambition. And creating clarity in where we're going is really important for everything from product development to supplier relationship development and product development. But it's also very important if we want to continue to grow also in new product segments or if we want to open new segments where care is moved. It will also be something that will guide us if we need to accelerate our growth or our fatigue movement through acquisitions in the future. But strategy and talking too much about the future sometimes can dilute the focus on here and now. And I, for one, is super focused on that we need to deliver two things. We need to deliver clarity for the future so we know how to execute and build the future audio. But we also need to deliver results short term. So what you can expect from us is a strategy that will focus both on here and now and how we lay the foundation for the future. So you will have both and, so to say. And our vision is to get this strategy approved during summer and that we will be able to communicate that to you after the summer. That means the second half of 2020. So that's a little bit the status on where we are in the work of creating the future Argo. And by that, we hand over to the Q&A section.

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 Philip Wetterquist from SB1 Meter. Please go ahead.

Good morning. Thank you for taking my questions. I have a couple. First, can you quantify a little bit more on the contribution from the 36 facilities in South Africa to global phase organic growth? Like, what would the underlying organic rate have been, exit order, and how does this inform into the exit round rate into Q2, the first one?

Okay, thank you for your question. I don't think we have communicated the size of the single order. And I do think that when we have orders of materiality, we will do press release and specify those things. So we have not done that. So we are not giving guidance on that because that would reveal information to competitors that we don't want to reveal. But 2,300, more than 2,300 beds through 36 care facilities, it is a substantial order, but we don't judge it being material.

Okay, thank you. My second question, you mentioned the Middle East cost pressure from energy and transportation as a fresh headwind here in the report. Did you see any impact already here in Q1, or do you anticipate it in Q2? And what is the current run rate assumption for 26?

Yeah, thanks for the question. So we have seen a minor effect in Q1. But of course, we and everybody else in the world are very much aware of how much, Oil affects not just the energy sector, but every, I would say, every process industry and every food production, you know, farm in the world through the production of fertilizer. So, of course, this will have effects, but we, so we are preparing to try to mitigate that in the ways that we can. We don't give forecasts on, what that might be because, and I don't think Arjo is the best equipped to give forecasts on the financial consequences of the crisis that is ongoing right now. But given that, of course, we are preparing us for the scenarios that we see internally. So I hope that answers your question enough. And I mean, if this conflict becomes short-term, Hopefully, there will still be effects, that's for sure. But if it becomes short-term, I also think it will be something that the world will be able to manage. And this is something that affects Argo in the same way as it affects everybody else.

All right. Thank you. Those were all my questions for now. I'll jump back in with you.

As a reminder, if you wish to ask a question, please dial pound key 5 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.

Okay, thank you very much. So today is the annual general meeting, so we are super excited. There will be more than 120 shareholders that will come and listen to us, and we will give a similar message to them, but of course we will focus on 2025. We'll give a short highlight of the first quarter of this year, and we will also give some flavor on the strategy work. So we'll share a movie where different leaders from Arjo is talking about that. So we are really excited about that, and by that we say thank you for this call, and we remain at your disposal. Bye-bye. Bye-bye. Thank you.