Arjo AB (publ)

Hello everybody. So first of all, thanks for taking time off from your hopefully good start to the summer. Today we're going to present the Q2 reports and I would like to begin by just going through some basic information about Arjo. So those who are new to the call or new to following us get a better grip on what we do. So we really are purpose driven. We have a an organization that is really inspired by the purpose of helping patients when they need it the most to protect their dignity, their integrity, and also to help caregivers do their very important job. We are experts in improving mobility, mainly in acute care and long-term care settings, a little bit also in home care, but mainly in acute care and long-term care. So everything from patient handling, hygiene and wellness, medical beds, pressure injury prevention, VTE prevention, diagnostics, and disinfection. We were founded in 1957 in Esla by Arne Johansson, and that's where the name Arjo comes from. We had in 2025 11 billion SEK in turnover, and we have approximately 7,000 employees globally. Our sales arms reach more than $100 billion. countries around the world. So a summary of the Q2 reports. So I'm really happy about the growth. Very solid organic growth of 4.7%. Still pressure on the margin. This comes from cost increases. It also comes from some price pressure in certain segments of the market. But all in all, we believe that the quarter was good. Global sales was really leading the way and we'll come back into that on the next slide. What is important to highlight is that there is an increasing demand for our sustainable solutions. And today, This quarter, Renew had had their all-time high sales. And Renew is our business of taking disposables, cleaning them in a safe way, and being able to use them again and not dispose of them. We have a very slight debit improvement. This is despite, then, the pressure on the margin. And this is mainly due to us being able to get some of the tariffs back this quarter. So we also have a positive development of the cash flow this month, and we have an improved cash conversion, not really according to our goals, but improvements from last year. So I will continue. Maybe I can shout out this, that we have also made our strategy. I will mention that towards the end as well. But as a summary, we inform in the Q2 report that we see clear potential to improve arduous value generation. And we are going to share all about that in more specific numbers and terms in the Capital Markets Day of September 24th. So just to shout out that North America, they continue to grow. US was leading there. Canada was slightly behind last year. And Canada also came from really high numbers last year, as did also US. So both countries in North America really had very tough numbers to beat. So we're happy that they managed to grow. Global sales with Western Europe and the rest of the world grew by an impressive 7%, and Western Europe were on 6%, and it was really nice to see the UK being back to growth. And by that, I hand over to Gustaf Karlsson to go into the financial performance.

Thank you, Andreas. And as Andreas stated, we had a solid growth in the quarter. Our gross margin came in somewhat lower than last year. Looking at the drivers, during the quarter we experienced an unfavorable sales mix driven by strong growth in global sales and relative lower growth in North America. Increased transportation cost and cost of materials pressure the margins in all categories. Part of the increased transportation cost is an implementation of a new transportation management system. where initial implementation challenges resulted in approximately 10 million SEK of one-time transportation costs during the quarter. But this will be fading out during the third quarter. Group rental margin declined in the quarter, primarily due to weaker profitability in the US rental business. During the quarter, we received an initial reimbursement of 22 million SEK related to US tariffs. In addition, a further million SEK is currently being processed with the majority expected to be reimbursed during the third quarter. The reimbursement is recognized as a reduction in cost of goods sold. Excluding the reimbursement, used tariff costs were 12 million SEK lower than in the corresponding quarter last year. FX had a minor negative impact on gross margin. In absolute terms, gross profit was negatively affected by 23 million SEK year over year. Nevertheless, this represents a significant improvement compared with previous quarter. Gross margin was impacted by a number of factors during the quarter. But as you will see on the next slide, this mean cost control helped offset part of that pressure. Let's move to adjusted EBIT. Next slide, please. As you can see, adjusted EBIT for the second quarter amounted to 211 million SEK compared to 208 in Q2 last year. Despite continued inflationary pressure, underlying profitability was broadly in line with last year when adjusting for one-off FX and FX. One of the drivers was continued improvement in operating expense efficiency. the OPEX to sales ratio decreased by 1% year-over-year to 34.6 compared to 35.5 last year. Organic OPEX growth was 1.9%, which is lower than the increase reported in the first quarter. Overall, the total FX had a negative impact of 12 million SEK on adjusted EBIT during the quarter. Moving on to the adjusted EBITDA which amounted to 482 million SEK compared to 475 million SEK last year. The adjusted EBITDA margin was 17.5% broadly in line with last year. The EBIT margin improved to 7.6% compared with 6.5% last year. The improvement was supported by lower restructuring costs which amounted to zero in the quarter compared with 34 million SEK in Q2 last year. Turning From profitability to cash generation, let's look at our working capital and operating cash flow development in a quarter. Next slide please. Operating cash flow improved during the quarter and amounted to 257 million SEK, an increase of 52 million SEK compared with the same period last year. The improvement was driven primarily by stronger operating profit, partly offset by less favorable development in working capital. Working capital changed by negative 122 million SEK compared with negative 87 million last year. Following a relative soft start to the quarter and a very strong June, a large share of the receivable remained outstanding at the quarter end. The increase in inventory is mainly related to finished goods transit intended to support sales during the second half of the year. Working capital days increased to 87 compared with 83 days in Q2 last year. Cash conversion improved to 53.3 compared with 46.6 in the corresponding period last year. For reference, cash flow from investing activities was minus 194 compared to minus 171 in Q2 2025. The number includes an acquisition of a service business in Australia amounting to 30 million SEK. Cash flow remained solid during the quarter, and with that context, let's move on to the net debt and leverage. Next slide, please. The increase in net debt during the quarter was primarily driven by the annual dividend payment of 259 million SEK and higher investment levels. Net financial items amounted to negative 40 million SEK compared with negative 48 million SEK in Q2 last year. The improvement was mainly driven by lower interest expense. As is typical in the second quarter, following the annual dividend payment, net debt to adjusted EBITDA increased and ended the quarter at 2.4 times. Our equity ratio stood at 49.5%, slightly down from 49.8% at year-end 2025. To summarize, we delivered stable profitability, improved cash generation, and maintained a solid balance sheet. With that, I will hand it over to Andreas.

Thanks, Christoffer. My voice is breaking up a little bit, but I hope it will be okay for those listening in. So I'm happy to announce, as we wrote in the report, that we have appointed five regional leaders to join the management team and report to me. This is something that will help us to really strengthen the voice of the customer in all group decision-making. It's also something that will help us to improve product development. It will help us to drive common agenda and efficiency across the group. So all of these regional managers are already part of our job. And they lead some of our biggest markets today. But now I'm happy that they have accepted to step up and lead a region then. So, and then I want to just make a small advertisement for our Capital Market Day that will take place in Stockholm on September 24th. And at that meeting, we're going to share our strategy, what it consists of, the direction Arjo is intending to take the next few years. And we're also going to validate and put concrete numbers on what shareholders can expect from Arjo in the coming years, the value creation behind and the timing of it. So this is something for everybody to look forward to. We have a strategy approved by the board. We have activated approximately 90 liters around this, and we are now then calculating the effects and the timing of the strategy. So I'm really looking forward to share all of that with you in September.