Careium AB (Publ)

Welcome to this quarterly report by technology-enabled care company Carium regarding the first quarter of 2025. In the virtual studio to present and give a Q&A, we have CEO Christian Wallén and CFO David Granat. Please welcome both of you.

Thank you. Thank you. We are in the virtual studio, but we are also here in our office in Malmö as we have our AGM today. In the background here, I hope you can see some bits and pieces from one of our refurbishing stations where we ensure that the life of our products is extended and that they are taken care of in a smart way. So, I apologize for the mess. We are renovating our office and thus we need to be in this area.

That's the way it's supposed to be in a company in growth. Please go ahead with the presentation and I'll be back for the Q&A.

Thank you. And as mentioned, I'm Christian Wallén, CEO and President of Carrier, together with my CFO and colleague David Granot. And we are very pleased to welcome you to this quarterly presentation. So let's begin with the highlights for the first quarter of 2025. So first off, we saw growth in all markets aside from Sweden, which we will discuss a bit later during this presentation. Despite the somewhat lower sales and the increasing investment, we attained reasonable margins thanks to a good gross margin development. And to us, the quarter was really interesting because we actually saw a lot of markets gain new contracts and we generated some of our first sales in Spain, even if they were at very, very low levels by the partnerships we have established there. We also saw the first significant order of stationary or fixed alarms. And by that we mean our core fleet or product range of the digital hubs that serve as the sort of centerpiece for the carrying ecosystem with the senior. Traditionally in France, we are very strong in the wearable or mobility category. But this was the first for us and really, really positive. The quarter also saw following a legal proceeding and us signing the Aske & Bärum contract for our Norwegian business, which is quite substantial. So with the highlights out of the way, let's head over to sales and gross margin for the first quarter of 2025. If you move to the next slide, please. So in Q1 of 2025, we saw organic sales decline by 1.6%, 2.3% adjusted for currency. All the markets did show growth. However, Sweden was impacted by a lower upfront revenue from leasing classified contract. This is something we've touched upon earlier, and we will discuss it a little bit more on the Nordic segment. What this mainly reflects to us is that it is a quieter period in Sweden for the new contract with the market, kind of holding off and waiting for new tender frameworks. Service sales increased 3.4% in the period compared to last year, mounting to CERC 160.3 million, up from 155. Product sales decreased 15.5%, amounting to 47.1 million SEK, down from 55.1. And this, I would say, was actually impacted quite a lot by high levels of product sales for those that looked to the quarter-to-long quarter in the UK and Germany in the fourth quarter of 2024. So we saw a little bit of a dip predominantly relating to January. So we delivered a gross margin of 44.5% up from 42.9%. This was driven by both regional and product mix, but there was also a one-time revenue recognition effect in the UK related to how we provide connectivity and SIMs for our customers, and it amounted to approximately 4 million SEK. And with that, we head to our market. So the next slide. There we go. Starting out in the Nordics, we saw sales decrease by 12.6% compared to Q1 2024. Service sales declined 10% to 80.7 million down from 89.7 in the same period of last year. Product sales meanwhile declined 41.7% and amounted to 4.6 million down from 7. Now what's important to mention here is that our business in Norway actually developed quite nicely in the period. the decreases are attributable to the Swedish business, where a number of factors are impacting us. In part, it's the prolongation of 2G and 3G, so that has a sort of negative effect on the product sales, as customers don't have the same urgency. But chief among the issues is probably that the market is somewhat awaiting on the new framework contracts. These are set for early summer in terms of the process opening up and so on. We'll talk about it a little bit later because Sweden is actually in a position where the two main frameworks are being renewed. One for assisted living and one for individual living. The one that we are on is for individual living, seniors living in their own homes. And this is the one that the market is waiting for. The other one is in full swing in terms of determining who will be on it. So in Sweden, then, what also happens, as we mentioned, is that when there are fewer contracts for us to bid on, we also have a bit of a double hit because when we classify a contract and it ends up as a financial list, What that means is that we need to extract the hardware component and take that as upfront revenue due to the nature of the bundling of the companies. And this effect alone in the first quarter, in comparable terms to 2024, amounted to 16 million SEK. Gross margin was steady at 39.5% compared to 39.2% in the first quarter of last year. And if we then turn to the UK and perhaps the number one market in all of European technology in the care, we saw sales increase 6.2% compared to Q1 of 24. Service sales were 52.3 million up from 43.4, an increase of 20.4%. And product sales amounted to 30.6 million down from 34.6 in the same period of last year, a decrease of 11.7. And as mentioned, Grossmore Engineering was positively improved by this one-time service revenue recognition effect relating to the billing of the connectivity component. And with that, we can move to the next slide in the Netherlands. And as always in the Netherlands, we saw consistent and strong sales growing 14.5% compared to the same period of 24. Service sales growing by 20.4% to 21.3 million, up from 17.7 million in the same period of last year. Product sales declined, but this is from very, very low comparable levels. Gross margin came in at 61%, down from 61.5%, so a minuscule change there. For other markets, perhaps as said before, the smaller markets tend to swing maybe more than others over the quarters. We saw sales increase 8.3% compared to the same period of last year. Service sales increased 44.2% up from 4.2 million in Q1 2024 to 6 million now in Q1 2025. To understand this, this is very much an effect Well, it features a somewhat different setup in terms of how you take revenue and sell hardware directly, or you have a stronger recurring component. But in France, we have a very healthy mix between the two. So this is what is driving this. I would also like to comment that we did have actual sales from Spain in this outcome, even if it's at a really, really low level, but it's still quite a lot more. comparable period, so to speak. Product sales came in at 11.5 million SEK down from 12 million in the same period in the last year, 4.2 decrease, mainly attributable to the extremely strong product sales that Germany or DACH region saw in Q4 of 2014. Gross margin improved slightly to 59.9% up from 58.6%. And the main takeaway, I think, is France really contributing strongly and Daesh steady. So very good, very pleased with the development there. And with our other markets out of the way, we turn to profitability and cash flow. And with that, I'm happy to hand over to our CFO, David Giranat.

Thank you, Christian. And now an update on the profitability for the quarter. EBITDA amounted to 34 million compared to 35 in the same period last year, giving an EBITDA margin of 16.2% compared to 16.6 last year. EBIT was 17 million in the first quarter compared to 90 million last year, reaching an EBIT margin of 8.0%. Despite growth in gross profit, EBIT decreased due to initiatives in sales and development, as well as depreciations. And with that, moving on to cash flow.

We can't see the slides at the moment. We can only see you, Mattias, looking at the screen. There we go. The slides are back. Fantastic. Yes.

And then continuing to the cash flow. Cash flow from operating activities amounted to 19 million in the first quarter compared to 29 million for the same period in 2024. In the first quarter, free cash flow was minus 4 million compared to 17 million last year. Taxes paid increased with 9 million compared to last year, partly explaining the lower operating cash flow. Investments in tangible fixed assets increased with 10 million as less contracts were classified as financial lease, impacting cash flow from investing activities, as Christian was touching upon before. Cash totaled to 37 million, and the bank overdraft facility had an unutilized amount of 32 million, resulting in available cash of 67 million at the end of the quarter. We closed the quarter with a net debt of 180 million and a leverage of 1.2. And with that, I hand over to Christian for summary and conclusions.

Thank you, David. We can go to the next slide. There we go. So in summary, positives for Q1 of 25, it's the growth scene in all markets, with Sweden being the one exception due to the market dynamics there. And of course, Sweden is this sizable component of our revenue base. This impacts the pull forward. On the commercial front, as mentioned, a number of really good development breaking into this fixed or stationary hub alarm category in France is a very good development of first substantial order there. And as mentioned, the small, but at least present sales in Spain is also very positive. Mentioned as well, the Norwegian contract win in Askerenberg, together with partners, with IT consultancy Atea as the bid leader, but Carium taking a substantial part of that contract, also really important for Norwegian business. As mentioned earlier, Norway is perhaps the most sophisticated market in terms of how harsh and severely it takes quality. So winning in Norway is really a hallmark of that you are doing something that is done in a very, very good way. In addition, I would also like to mention, perhaps somewhat forgotten, that our iCare Center, the operator platform for alarm receiving, a key part of the Careium ecosystem, is also seeing a very strong and healthy pipeline develop. This has not converted to sales. I want to be very clear on that. We are quite impressed by seeing how we are obviously connecting well with the needs of customers for the full digital offering that we have. In addition, I would also say that the margins held up reasonably well, a little bit supported by this UK one-time effect related to SIMS. For the challenges, I think it's very, very clear. The main, and I would argue almost only, challenge for us is the Swedish situation. It creates tough comparables for us. The market dynamic is clearly impacted by this. We think the effect is likely to persist until the Swedish ADA, that is the agency that manages these framework contracts, Once they really get their show on the road, there is caution. We can see a clear number of less contracts out in the market to bid on and so on. And for the moment, ADA, which is not a huge organization in terms of its telecare arm, they are completely preoccupied with the assisted living framework agreement. So at present, all the entrants that want to be on that framework are currently being evaluated and demoed. And that includes us, since we have also thrown our name in the hat to be part of this, as we see assisted living as a key developmental area for us. But that is ongoing, and we don't think that other have the capacity to manage two as complex processes at the same time. So they were likely to do them in sequence. So the big indicator for when we see good traction movement is probably when they close and finish the existed living framework process. So going forward for our priorities, of course, a tremendous focus on sales. Super important because we need to counterweight the lost momentum in the Swedish market. So we're doing everything we can there. As we also communicate in the report, we have three very, very clear focuses ahead of us. Number one is strengthening our B2C capability and offering of the operations. This is everything from new website structures to integration of workshops and so on to really drive towards that private market that is really, really strong in the UK. As mentioned, we have about 20,000 seniors who we service directly. And we see this as a very, very important segment given the unit economics and so on and how we are able to do a very good job with very, very high trust, pilot scores and so on. Second part, of course, is the movement in the assisted living domain, where, as mentioned, one of the really big topics for us is to be part of the new Ada framework for this, currently being evaluated. Our team is in Stockholm today, demoing our solutions. So that's really, really interesting. And as we also communicated, We are now actively looking at building a good pipeline and having good dialogues in relation to acquisition opportunities. Now we have a very, very clear target profile that is very integration and efficiency centric. So we are not looking at any super fancy technology companies. We believe we have the best technology in the business that has a broader portfolio. So that's not our need, but rather more Boring companies that we together with them can create a really strong shared platform. And in relation to our guidance, as we have stated, with a softer start in the first half of the year, mainly attributable to Sweden, we retain our guidance for improvements on net sales, profitability and cash flow for the year 2021. And that concludes our presentation and we hand over to the questions.

Thank you Christian and David for that presentation. It's always a lot of things happening.

There are always a lot of things happening up there.

Absolutely. Let's start off the Q&A by bringing in Alice Baer, equity analyst at ABG Sundahl Collier. Please go ahead with your questions, Alice.

Hi, thank you for having me. So just to start off, you have guided for a soft H1. Is the Q1 performance a good proxy for what you would view as soft or should we expect things to sort of slow down more before it picks up?

I think it's a bit hard to say. I think we are, of course, not happy with a Q1 like this. It is extremely frustrating. be what they are, since we see good development in the rest of the business. So in that regard, I think it seems that you and your other colleagues have done a pretty good job in interpreting our soft. And the only thing I'll say is that that seems to match quite well with how we are seemingly performing due to this situation. that until the situation is slightly different with more traction in the Swedish market, all we can do is do our absolute best in Sweden, of course, but also in the other markets to do really well. I personally think, and I think you can see it a little bit in the numbers also, that the UK is coming into becoming more and more a key piece of the carry-on puzzle. And this is, of course, not unintentional. It is perhaps the strongest market in all of Europe. We have also invested a lot of R&D and focus on making the Francis and the German is really competitive. And we think we see good evidence of that. It's not just because we have. hire a ton of salespeople, it's rather because we have developed our offering in a way to better cater to these high potential markets. So yes, we expect things to keep being soft for the first half.

If this is at this level or slightly above or slightly below, I think it's too early to say.

Okay, well, thank you for that color. So moving on, you commented about this one-time revenue recognition in the UK that affected the gross margin. Could you tell us anything about what the material impact on the gross margin was?

About 4 million SEK, obviously. Yes.

All right. Good. Thank you. Continuing on cost then, you've managed to keep admin costs down a lot despite investing in new markets and services. How should we think about your need for added talent and admin costs going forward? Are you capable of moving forward with your growth plans with the current team or are you planning on increased recruitment?

No, that is actually a very good question because it's about the speed and velocity of how we want to build a company, right? And Without going maybe too much into details, if we had an open checkbook, we would, of course, do a lot of hiring. We see a lot of needs in many areas that could strengthen us a lot. However, for the year 2025, our main talent investments, which are really substantial, they are in R&D. And that is how we're going to do it. If we're going to do something outside of plan related to R&D, we are going to do our absolute best to compensate with cost takeouts. So we really try and be quite stern on ourselves with everything that is not a real need to retain the sort of retain and attain, depending on how you look at us, number one position in Europe, which is very R&D driven as a technology company. Anything outside of that. I mean, we'd love to have great people doing our M&A work, for example, or adding more financial controllers to be even smarter. But we're going to be very, very cautious about doing so. if we cannot find costs to be taken out elsewhere. But we are very active in that area. So hopefully we will see more and more effects. And part of that is on the sort of supplier-based negotiation side. And part of it is, of course, on the business operations side and how it can be made more efficient.

All right. Thank you for that. Continuing on OPEX then, OPEX increased quite a bit relative to sales. Was this just a heavy quarter on OPEX, or should we view this as sort of a new run rate to support growth?

I would say, I mean, it's probably the status where we are right now. We do investments in sales, we do investments in R&D, and that's what's also showing. The OPEX has also affected a little bit of increased depreciation, as we touched upon earlier. the ICC platform started depreciating in Q3. So that affects with approximately 2 million in the quarter.

All right. Great. And just on the lower share of these leasing contracts in the Nordics, was this sort of a one-off or do you expect continued decrease in these upfront product sales revenue recognitions?

No, I mean, that is the main effect, which is... creating the challenging comparables. So that is to be retained as long as that revenue recognition principle is in place and the market is performing the way it is in terms of the number of contracts. Now, for us, it's really important to highlight that it's easy to think that, are you losing market share in Sweden? But we do not see that at all in terms of the the fact that it's more on the classification side, how much revenue is classified for the upfront revenue sort of.

Okay. I see. Good to see that you've added focus on these private pay markets. Could you tell us anything about your plan for B2C and when we can expect to see a financial effect from these investments?

Yeah, so I mean, B2C is, we haven't talked about it in a capital markets day or anything like that. But while it's the smallest segment on the service side across Europe, it is actually perhaps the most valuable in terms of the financial performance of it. Yes, you have a cost to acquire the customer like you do in any consumer-centric business, but that is surprisingly low. an industry being quite small one you don't have to compete with the you know ikea's or or samsung's or whatever big companies with huge marketing budgets and since we are also having all the hardware and the software and the services in a proprietary manner this means that we can deliver it very cost efficiently for really good lifetime values so i think At Carrion, where we've been really, really busy with getting things in order over the last couple of years, we're now in a much more stable state and so on. This has been sort of a forgotten area because it has required a competence that was not present in the company. But during the quarter, we actually hired our first really, really senior people to drive and run this for us. And we don't have an insubstantial base with our 20K end users that we do service. So we have a good platform to build on. And I'd say that the potential in this area is really, really interesting. But there is also a lot of legacy. We are far from your modern consumer-centric brand, so to speak. So we have to bring ourselves up to a high G-level before we see any really, really strong outcomes there. But we expect to be able to communicate more on the development in this domain during the year. So we're not waiting for it. We're quite active.

All right. Good to hear. And maybe a question for David. Looking at the balance sheet, we saw sort of a material increase in receivables in the quarter. Could you talk a bit about what's going on there and what we can expect?

I mean, we expect the receivables to go down a little bit. I would say it's at a high level at the moment.

All right. Got it. And just a final question. You talked about this assisted living in Sweden, this framework. When do you expect to know if you'll be part of this framework and how large is that contract? Can you just tell us anything more about that?

It's always a framework, so you can never know what share of it you're able to capture. We've been developing our solution in this area together with partners also for quite a long time. They are currently in the demo stage. We have passed the first gate. You gain entry, you are classified as okay, and then the next step is kind of technical demos and evaluation that is going on right now. We would expect them to conclude this mid-May, maybe. Could be early June. We don't know. We are dealing with a state slash municipal entity, and they sometimes are maybe not super fast, but they are also not super well resourced, so I think they are actually doing the best possible job that they can. So I would say that maybe around that time frame, mid, late May, early June, we should have a good indication. And the framework is also open to, as the writing reads, at least 10 entrants. So we in We interpret that as that there is a bit of an open door policy if you can ensure that quality, because 10 is a lot on frame.

Okay, thank you. Very clear. That was it for me.

Thank you very much Alice Baer of ABG Sundahl Collier. We will soon have some more questions of equity analysts. But first, the turbulence in the global markets with tariffs and big movements in currencies. How are you affected and what are your strategies coping with this?

Yeah, I think every sane person looking at how the world is moving gets a bit shocked. For me, flying around a lot, I'll confess to, in my entire life, I've never been in a situation where you get on a flight and you take up your phone as you land and the world has somehow changed. That is just absolutely bizarre. But for us, of course, we have a lot of manufacturing partners in Asia and mainly China. We have really close relationships and many multi-year engagements together. Short term, we actually do not foresee any immediate effects. It depends, of course, on what China and Europe decide to do together. But for now, we don't see any effects on the tariff side. We are more impacted by the situation in the Suez Canal with the impacts on oil. shipping costs and the delays predominantly making it really hard to forecast demand since you have to add two more months for a seed rate, which is awful, of course, for our supply teams. So on that side, I would actually say that we don't see any effects. On the currency side, most definitely. We see it, but sometimes it's good because we buy things in US dollars from our partners in Asia. And sometimes it's bad because we take revenue from pounds, for example. So we're a bit all over in terms of the FX effects. Would you agree though? Yeah. Yeah.

Okay, thank you. And equity analyst Jakob Lebmge of SEB could not participate in this broadcast, but he has sent me his questions for you. And the first one goes on gross margin, other than regional mix, are there any other factors contributing to the solid development growth from certain high margin products, for example?

Well, in part, of course, the impact of this But I will say that, as many of you might remember, in late 23, I think, we announced that we set up a dedicated supply chain function, headed by our colleague Ulrik Nilsson. And I would say that we are now seeing the effects of Ulrik and his team's great work, because it is impacting the gross margin on the product level in a very positive way. So that is also a factor. So I would say it's a combination of those two things.

Okay. And speaking about the UK, could you quantify the one-time recognition effect in the UK? And what would UK service revenues be excluding this?

Yeah, so it's mentioned about 4 million. I can't remember, was it 20 point something? Yeah, just reduced 4 million. Reduced 4 million from UK service.

Thanks. And in general, would you say that the U.K. market is back to more activity and better growth now?

Well, I mean, the U.K. market in its totality is, you know, better than ever in the sense that the new government I was at during this quarter, I was at ITEC, which is the biggest fair for for technology care in Europe, which is in U.K. And they had the Cabinet Minister of Health on stage speaking with a very dedicated message from the new government that this is really a priority for the UK to invest in these types of technologies and services for its seniors. And, you know, it's a legal government, so clearly they lean more maybe towards that side. The proof will be in the pudding if there's more money coming and so on. But I think it's a very, very strong message. And we do believe that the UK has not slowed down in activity or anything like that. Rather, it is moving as a market quite well.

And we have some questions from our viewers. And one is, could you give some flour on the pipeline in iCare? And when do you think you are ready to onboard new European customers?

That's it. Excellent question. So, on a very kind of personal level, also coming from a background in digital environments and so on, maybe it's us not communicating well enough, but the technology portfolio that we have is actually quite, it's really respectable in the European context in this market. And we are one of the few, I would say one of maybe two, possibly three companies able to provide a kind of end-to-end modern digital sort of suite for the technology-enabled care services industry. And the platform is not just about the ICC. It's rather an ecosystem of the IoT backends and the APIs and the platforms you do the work in and the device management and all of this taken together, that is the real value of our business, I would say, because it enables us to do all the services, to do good sales and so on. So for us, the pipeline, the only customer we have communicated is the German customer and the medicus. And that actually corresponds a bit to our pipeline being the strongest, the engine. And aside from that, we also had really, really good developments in a lot of conversations with big sort of alarm response centers for public side or on the private side to effectively find a smart way of bundling the digital technology and the hardware together. So for us, it's a springboard for better commercial conversations. both the product and the portfolio, but also the commercial outlook for it. Now, as I've said many, many times, in relation to net sales impact, something like onboarding a customer, which we could do tomorrow on ICC, that is maybe not so meaningful. It will never be 75% of net sales. However, it's probably in the margins where it gets really interesting because the margins are something else compared to both hardware and services, of course. So we are very much focused on this, but we are also early in the sense that we launched it in Q3 of 23, or communicated it. What I will say, though, is that compared to, I'd argue, all of the pure platform players, our own platform for the service delivery. And that is something that to customers is seen as extremely positive because what it means is that when they have a problem, we have a problem. So you're not in some queue. You are as vital as our own operation if there are issues. And that is very, very powerful out in the market. So we get a lot of trust from that because you kind of tie yourself to the mask together with the customer. And that's actually a good thing for us.

Okay, thank you. Now I have a pretty bit complicated and a long question of technical nature. Why aren't the contracts classified as financial leases and how does that affect the cash flow? Is the hardware revenue recognized over the lifetime or the contract instead?

It wasn't so long, but it was a very good question.

Yeah. I mean, if they are not classified as a financial lease, it's an operational lease. And then it's as with any other business. With the classification, it's a bunch of it is basically down to kind of singling out the hardware product compared to any other product that you will kind of sell to other customers. And some we see as we see less contracts, we also see those contracts not classify two financial leases at the moment. I would say if you don't see the operational lease and financial lease, there's no difference in cash flow in the period or during the contract lifetime. So you would see a positive, if you don't get the effect on the P&L, you will get the If you see the effect on the P&L on the positive side, you will see the same negative effect on the working capital.

If it's a financial lease. A technical question gets a technical answer.

And another question related to that. Is hardware that goes through financial leasing classified as service sales? And if so, why?

Hardware that goes through financially is classed by the service, yes, because it's part of a service contract.

Thank you. And a more personal question to you, Christian, could you spread some light on the fact that you recently sold some of your stocks in Carrium?

Absolutely. And very much for personal reasons related to my family's living and housing situation. So I understand that that had a really big effect on people's perception. We got a lot of questions on our IR email and we really took our time to try and answer them. But no other reason than that. I will be very, very happy to at the earliest opportunity reinvest in this fantastic business.

Thank you. And if the dollar stays weak, will it be positive for your hardware margins? Yes. Good. And that's all the questions for you today. But could you wrap this up by giving us your thoughts on the rest of 2025?

Oh, big question. So first off, from a kind of financial markets perspective, I would say that we retain our guidance, as we stated in the report also. What I really look forward to is very much connected to these three, maybe highlight the topics of our development into business to consumer, to hopefully be able to provide the markets with good updates on that area. Reviewing our opportunities in the assisted living side, it will be a important part of the growth for us going forward. And we do think that we have a lot of good thinking on how to structure offerings and so on. Let's see what the market says. And I also think that the fragmented nature of this business and the fact that we're now in a more stable state is very conducive to reviewing acquisitions. And I'm very thankful for our board to say sort of get the go ahead now and go look at this, see what you can find. and what you really think is right for us in terms of creating a stronger and stronger platform to become the European champion of technology. I also think that the R&D investments that we are doing in the year, while they do burden us a little bit in terms of their cost profile, they are absolutely necessary. And there is so much to do. And if we do it well, we're not talking about things that will come to market in two or three years. but rather much more near term, we have a really, really good chance of creating an even better business and company and partnerships and so on. So I'm really looking forward to see the outcome of those investments and all these great people that we're able to attract, which I also think is really important. Because if you are a company like ours, while it might seem like a strange little niche or segment, you'd be surprised that how well it connects with a lot of talented people's willingness to commit themselves to doing work in a sector that is really beneficial. And we have a very, very strong notion of the fact that we want to service millions of people all over Europe with this great technology and these great services. And that is a very, very engaging mission for good people to be a part of. So I'm really, really happy that we're able to really crank up the efforts on bringing great talent on board, especially in R&D for 2021.

Okay, Christian Wallén, David Granat, thank you so much for your presentation today. Thank you. Thank you, Alex. And I want to also say thank you to all the viewers and see you again in approximately three months.