Asker Healthcare Group AB (publ) (ASKER) Earnings Call Transcript & Summary

Welcome to Asker Healthcare Q2 Earnings Call 2026. [Operator Instructions] Now I will hand the conference over to CEO, Johan Falk and CFO, Thomas Moss. Please go ahead.

Hello. Thank you, everyone, taking some time of, hopefully, some vacation listening to Asker Healthcare Group's Q2 report. We are happy and proud to present a 24% adjusted EBITDA growth, out of which 6% was organic. this quarter. We're also happy to see a 10% EBITDA margin for this quarter. So that's good. If we take in a few highlights one by one, the net sales was SEK 4.7 billion this quarter, up with 18%, out of which 5% was organic. The adjusted EBITDA, SEK 471 million, up with 24%, as I mentioned, 6% organic and the margin, 10%, which was up 0.5 percentage point from last year. We have a good and robust both cash flow and efficient working capital. So our most important KPI, RK or EBITDA over net working capital was 69%. We work hard, as you know, with ESG and sustainability and MSCI rated us AAA for the first time. So that's also something we're happy to see, and it helps us winning tenders, especially in the Northern Europe, and it actually supports our business in a very good way. In terms of acquisitions, we had one new acquisition in Ireland in July, and we have passed 50% of our annual targeted acquisitions, which we will touch upon a little bit later. As we usually say, the best way to follow us as a company is on a rolling 12-month basis, and that's -- we had a target of delivering more than 15% of EBITDA growth. It's now on 21%. Our over 69% and our margin on a rolling 12-month basis is now steadily growing to 9.8%. Our leverage, as you know, important, staying under 2.5x, and we're now at 2.37x. So that's giving us some headrooms upwards. We usually show these pictures as well. We have had many, many years of good growth in this company, and we have hopefully in many years to come both organically as well as via M&A. And now we're adding another bar to derive in this picture also weigh about the 5% growth, which is good to see. I hand over to Tom.

Great. Thanks, Johan. Let's go into some of the numbers in a little bit more detail, but very much supporting the message that Johan gave there, continued solid growth across the group. So net sales in Q2, up 18%, 5% of that organic, as Johan mentioned, 0 FX effect in this particular quarter. Adjusted EBITDA, again, as Johan mentioned, up 24% of 6% organic, and again, no FX effect on the EBITDA line. margins at 10%. And for us, what's pleasing to see is that we do see more lending from all parts of the group, all regions and the vast majority of companies performing very nicely and the newly acquired companies coming in, in a way, supporting the growth of the group as a whole and also nothing to drive that margin expansion that we see when we look at the overall figures. If we look on the right-hand side of this page, we see the half year picture, January to June, also very much in line with what we said at Q1. As you'll remember, we had a solid Q1. We backed that up now with another good, solid Q2 report. And so we see the half year effect of that 7% organic EBITDA growth and 23% total EBITDA growth so far this year. If I move to the business areas 1 by one, let's start with Business Area North. Also a good quarter, performing nicely with the organic growth coming through, net sales up 13%, EBITDA up 10% and important for us to see that we're able to maintain those good margins in Region North above 13% on a rolling 12-month basis. Worth also noting we've talked about this before, the new distribution center in Gothenburg progressing well in line with our plans. And actually, we've started to drive some early early-stage operation activities through that system, which is going nicely, and we'll continue to ramp that up through the second half of the year. On the right-hand side, the half year figures, again, very much in line with the Q1 and Q2 stability and solid performance we see adjusted EBITDA growth of 8% net sales growing at 10%. Turning to Business Area West, another strong quarter in West adjusted EBITDA up 32%. Nice to see that the margin is also rising as we hope and expect up to 9.6% in Q2 and again, steady performance across the business area, very much in line with what we've been reporting from West in recent quarters. And also worth noting that the larger acquisitions that we've done invested in recent times also delivering very strongly and helping to support those scale business benefits and the growing home care business also driving that scale benefit across the region as well. And then our third region, Business Area Central a very similar story, actually, to the 1 that we presented on the other 2 regions, continuing the strength in the results, positive margin development. M&A is contributing strongly. So net sales up 33% in the quarter, adjusted EBITDA up 56% and the margin, again, rising nicely in quarter 2 to 9.6% and a very similar message to 1 that I've given on other regions and the group as a whole. Recent acquisitions coming in strongly contributing nicely to the overall region and the trends that we've seen in recent quarters. And at the half year, adjusted EBITDA growth in Central is now running at 52% net sales growth of 29%. A brief mention of our over EBITDA of net working capital. We always include this our key internal metric, as Johan mentioned, make sure that we're focusing on that right balance between profit and also efficiency in terms of how we deploy our working capital. So good to see that we're maintaining good strong performance on this metric. And then cash flow, I spent a little bit longer on cash flow in Q1. I will do the same again now given that we had some significant one-off cash outflows in Q2. The good thing from our perspective is that they came in exactly as forecast, which continues to show that we have good visibility of our cash flow and the availability of that cash flow, which is so important to driving our M&A agenda and enabling us to use that great pipeline that we have going forward. So the adjusted cash flow from the operating activity is SEK 330 million in Q2 good solid performance. CapEx, we continue to spend our biggest investment at the moment is the new warehouse in Gothenburg that I've mentioned very much in line the plan approximately SEK 75 million remaining to be spent on CapEx in that facility during the remainder of 2026. The significant one-off cash flows that I mentioned, both fully forecasted and anticipated. The earnouts, SEK 463 million was paid for company earnouts for deals that came to the end of their earn-out period in December 2025. And of course, the dividend, the fun we've paid that out. Cash conversion, I'd just add this as a note, it's not a KPI that we lift at the very highest level, but it's 1 that we actually monitor very, very closely internally. So good to see that, that's running at a healthy level above 80%. And then final note on cash flow. We continue to look forward. We continue to want to make sure that we have good visibility of that. And it's worth just once again reflecting that the large significant one-off cash outflows we had in Q2 this year, were something of an exception. When we look forward to 2027, the earnout payments are currently forecasted at a much lower level of only SEK 150 million. And then final slide for me, just a word or 2. On leverage, naturally and again, as anticipated, the leverage was marginally and temporarily elevated because of those large cash outflows that I talked about but still at a level that very much ensures that we can continue to have the capacity to drive the M&A agenda, 2.37 according to our external target definition but also as we talked about a little bit at Q1, there are other ways of thinking about leverage. So I also continue to present the alternative leverage ratio that we look at which is really equivalent to our bank leverage covenant, which means that we include all of the earnouts and outstanding M&A payments that are due in the next 12 months, and we also include the 12-month pro forma EBITDA from the acquisitions that we've done and that gives a figure of SEK 2.43 billion. With that said, I think I hand it back to Johan.

Thank you, Tom. Okay. So let's look into the M&A part of our business. We have done 4 acquisitions year-to-date, and 2 of them ones are a little bit on the upper side of our range, SEK 300 million and SEK 350 million. So we have the last one, Murray Surgical was completed in July, adding some SEK 73 million in annual sales. You might also have noticed that we discontinued an acquisition in Denmark, Kirstine Hardam due to competition authority was dragging out in time and we both, us and the seller said that let's take a step back and focus on other things. So for us, it's important to be clear. It almost never happens. The discontinued processes, but you should never continue something that you don't feel is 100% right. So we have now focused on our strong pipeline and are replacing that with another company. So all in all, very good operational performance in the M&A team and the pipeline with good visibility. Down to the left, we are showing what we talk about when we look at a full year in M&A. For us, it's important to deliver over 15% annual growth on EBITDA, which we have done for many years. And the biggest part of that is using our cash to buy new companies and that usually is 10% to 12% of the annual growth. So for us now when closing Q2. We're happy to see that we are a bit ahead of that acquisition curve. So for this year, we have good visibility to continue to do acquisition during the fall is what we can look forward to. Going into one of our acquisitions, RMS medical device that we closed in April. It's a fast-growing metal device distributor, serving hospitals and health care institution across the Benelux. And they have different areas of expertise as all our companies that we buy. A little bit of artificial intelligence comes in here as well. It's more and more companies use that to be helping customers in a good way. They have 40 years of experience in the Berlin market. And they have roughly SEK 170 million in annual sales with 25 employees and we expect them to contribute positively to our EBITDA margin as well. So a good acquisition. All right. Coming to an end. To summarize this then, I mean, this quarter was a good middle of the road, stable quarter. So of course, the 24% total growth, out of which 6% organic EBITDA is something we're really proud of in the market that is growing with 3%, 4%. So this shows both that we can grow faster than the market and also use the group scale to see that we can grow faster on the bottom line and also have a 10% EBITDA margin now, which is our target. So we continue to deliver good and robust cash flow, and the M&A process is according to plan. So with that, I think we can close this presentation and go into Q&A.

[Operator Instructions] The next question comes from Gustav Berneblad from Nordea.

It's Gustav from Nordea. I thought maybe just to start off with North, if you can just give a bit more color there on the strong organic growth of 10% year-over-year there any one-off related larger orders from defense and so forth? Or if it's just broad-based or more related to a more easy base effect from last year?

Yes, I can say a word or 2 about that, Gustav. I think there are -- to answer your first part, you guys, no, there are no big lumpy one-off orders in terms of similar to what we had back in 2024. I would also say, as Johan mentioned, we would kind of continue to push you to think about rolling 12 months, don't get too hung up on 1 individual quarter. So 10% is obviously it's a strong figure, but I don't think we should suddenly conclude that there's anything particularly special happening in North. The region is doing well. They are performing nicely operationally. They're doing good things. We look forward to getting the new distribution center up and running, but this is more of a steady, solid, strong base performance from the region rather than anything that indicates anything other than that.

Yes. Okay. That's very clear. And on the earn-out payments you comment on here for 2027 on SEK 150 million. Is it possible to just elaborate a bit more on how much larger they can potentially be and if they also will be paid out in Q2?

Yes, that's good question. So yes, they will. The vast majority of them will be paid out in Q2 at the moment I anticipate they will all be paid out in Q2, but things can happen. But yes, is typically the quarter we pay them out. The reason for that is we wait for the fully audited and signed off annual reports from the end of the previous year, and that usually takes a couple of months and that becomes available in Q2 and then we then we pay the earn-outs exactly as we have done in 2026. The earnout payments that will be paid in 2027 are for companies that come to the end of their earnout in December 2026. And typically, those companies are companies that will have had an earnout period that has run '24, '25 and '26. So they will have run for 3 years up to that point and then the earnout is paid. And obviously, '24 is done, '25 is done, 26. We're halfway into it. So if you think about it, we are already sort of 80% into whatever the math is 75% of the way into the final calculation of that earn-out period. So the likelihood that, that figure would change dramatically is very, very small because the vast majority of that earnout calculation is already finalized, if that makes any sense, I feel I made that more complicated than it was supposed to be, but I hope that makes sense.

No, that's very clear. If you cannot state the full figure, I take that for sure.

No. But I think I try to -- what I'm trying to say is when we say SEK 150 million, it might be 10% higher or 10% lower, depending on how the last 6 months of the 3-year earnout period develops. But it's not going to suddenly jump to SEK 300 million, partly because there isn't time for those companies to earn sufficient extra earnings adjusted that. And also the way we have gradually evolved and developed the earn-out model over recent years is we have actually established a more firm ceiling on how much the maximum earnout payment can be. So the earn-out we paid out this year had a more generous ceiling than the future earn-outs have and will have. So you can be confident that, that SEK 150 million, yes, it might move a little bit up and down, but it's not something that will move dramatically.

That's very clear. And then just the last question here. I know you probably talked about this and very well discussed warehouse in Gothenburg, but can you just remind us, are there anything we should be aware of in terms of which quarter will be a large move for you where you might -- where you might anticipate sort of effect on volumes or anything just that might hamper earnings or sales?

Got it. Yes. No, I can say. I think our philosophy with this and the quality of the team that we have down there means that we don't expect any impact in terms of volumes, operational actors will not see the effect of this transfer. And we're confident we have backup plans in place and redundancies in place to ensure that, that won't have a short-term influence -- the plan is to continue gradually ramp up the operation activities through Q4 -- Q3, Q4 this year. And effectively, we will be fully operational in the first half of 2027. And then obviously, there will be some minor teething issues that we need to work through. So we expect the full benefits of the SEK 50 million to SEK 60 million a year that we expect to save those full benefits will not start to be seen in the P&L until H2 2027.

That's clear. But will there be any dual costs or anything like that?

Sorry, yes, second half of your question. Yes, so we anticipate a very low single-digit millions in terms of double manning primarily it's double manning costs that we will have. The largest chunk of that we will probably see in Q4 this year, there will be perhaps a little bit in Q3 and a little bit in Q1, but low tens of millions of double manning costs at the back end of this year. There will also be a temporary effect on working capital perhaps somewhere between SEK 50 million and SEK 100 million of additional working capital that we will have for double inventory, again, through that same time period, primarily concentrated at the back end of this year into the first part of next year.

That's clear. Low single digits, is that for Q3, Q1 and Q4, respectively, or...

No, no, combined.

Combined. Okay. That's clear.

The next question comes from Jakob Lembke from SEB.

My first question is on North, where the EBITDA margin is down here for the second consecutive quarters despite what I believe is some positive impact from M&A. So yes, just if you could elaborate a bit on what's behind that, please?

Yes, I can, in a way, give you the same answer as I just gave to Gustav, Jakob. I think there will always be small fluctuations up and down. When I look at the margin in North, the rolling 12-month margin in December 2025 was running at 13% and the last 12-month figure when we looked in Q1 was running at 13.1%. The figure now is 13.5%. So from our perspective, margins are stable in North and I wouldn't read it too much into what looks like a sequential drop. As I say, we're confident that margins are running at a stable level above 13%.

Okay. And then just looking for Q3, it seems like margin is usually a bit lower in Q3. Is it possible to guide how much that sort of sequential drop usually?

Again, I would guide to look at the rolling 12 months margins. I think you're right, Q3 historically and currently tends to be our weakest quarter, the smallest quarter overall. But yes, I would continue to look at the rolling 12 months figure, and that we expect to be around 13% to continue at that 13% plus level in region noise. There's nothing going on that means that there should be a dramatic change to that.

Okay. Then on the West, the organic growth is a bit lower than we've been used to, but I think the EBITDA growth still -- the organic EBITDA growth looks quite good. So if you can elaborate on what's happening in West as well?

Yes. Again, I sort of get slightly the same answer. I wouldn't read too much into that. I think you need to always look at this business on a rolling 12-month basis. we did have particularly strong organic revenue growth in West going back last year, that clearly anything above 10% organic revenue growth was going to not be maintained in a market that's only growing at 3% in the quarter, as you say, it's a little bit lower. The half year figure is running at 4%, but we are delivering strong leverage to the EBITDA growth. So Region West continues to perform well. We expect the organic revenue growth in Region West will continue to be in that stronger than the market, perhaps up to twice the rate of the market everywhere else. There is no there is no significant shift in the underlying steady strong performance that we have in Region West.

Fair. But if I may follow up then, if the momentum in the home care business in West still strong? Or is that slowing down a bit -- if there's something else that is a bit -- I mean it is a meaningful sequential drop, I would say, in the organic growth?

No, I think we would not say that we see any particular slowdown in the opportunities in the Home Care business. We continue to build strength and scale there. So we have no concerns. And I understand when you look quarter-on-quarter, mathematically, you see that what you perhaps could conclude as a slowdown. But I do not think that, that actually is sort of some fundamental change in the market dynamics. It's important to understand that this region is the home care is a very significant and important part and has driven the strong growth in West, but that's not the only thing that's going on in the region. So I wouldn't jump to the conclusion that's how the opportunity in Home Care has suddenly stopped.