Careium AB (Publ) ($CARE)

Careium have released their report for the first quarter of 2026. And I welcome you to this live broadcasted presentation presenting is interim CEO, Peter Heuman; and CFO, David Granath. After the presentation, there will be a Q&A where you investors can ask your questions in the live chat, and I will raise them during the Q&A, and we are also in the company of 2 equity analysts that will ask their questions. Welcome, Peter and David.

Thank you.

Thank you.

And before the presentation starts, in brief, Peter, what have characterized the first quarter of 2026?

But I would say that as you can see in the report, I think we have an underlying strong growth in the first quarter of the year and then taking into consideration our earlier communicated initiatives that we are focused on some modernization internally. I think the combination of doing all these efforts as well as at the same time providing a very decent underlying growth. I think that would be the main summary and characteristics of the quarter.

Okay. Thank you so much. And by that, please go ahead with your presentation.

All right. Thank you. But then if we go to the next slide, which should be the quarterly highlight slide, I guess. Here we go. Yes, like I said, Careium provides for the first quarter of 2026, and underlying adjusted growth for -- with over 10%, almost 11%. So we end up on almost SEK 220 million. I think that's a strong statement. You can see that we are growing both related to our services sales and to our product sales. As earlier communicated, we are running some initiatives internally to improve maybe you can say a little bit of short-term pain for a long-term gain but still doing that, I think we are delivering decent gross margins being aware of this, also a decent profitability. And in the quarter, it was announced that a permanent CEO, Tove Christiansson, will join here in a little bit more than a month starting 1st of June. So I think that will be the highlights for the quarter. So we can go to the next slide, and then I will talk a little bit about the sales. And I will continue to give you a little bit of insight and brief in more detail about the different markets before I hand over to David, who will provide you a little bit more guidance on the profitability and cash flow. But starting with the sales related as we started off, underlying almost 11% growth, it's very close to SEK 220 million in the first quarter. So I think we have a good momentum from a sales perspective. You see that both our service sales are increasing to SEK 164 million approximately, but we also have an almost 20% growth in our product-related sales. This is mainly driven by some of our -- we call them other markets, but also the activity on the analog-to-digital switch from the U.K., and I will come back to that. Gross margin, I would say, is somewhat in the region of historic levels above 40% there. So overall, adjusted for some of the currency, SEK 220 million and almost 11% growth in the quarter. So with that we can go to the next slide, and I will try to go you a little bit from some of our different markets that Careium is reporting on. So if we start with some of the larger areas, as you can see, the Nordics and U.K., this is a large portion of Careium's total revenue, and it's also where we have our own alarm centers, et cetera, in those markets. If we start with the Nordics, you see that services sales is up, so it's a good growth driven by the Nordic countries, and it's driven by also some large contracts that we have historically talked about from Norway. I don't know if someone needs to mute or. All right. Product sales, around SEK 5 million, gross margin decreasing somewhat, but has to do with the upfront loading of some long-term fairly new contracts in Norway. So I think, overall, a good growth and decent profitability in the Nordic region. If we go to U.K. It's a little bit more complicated. As you have probably seen in the report, and I know that some of you are following Careium, there were some accruals and things done last year for the corresponding quarter, that makes it a little bit challenging to compare. However, there is growth also in U.K. We are growing the -- primarily the product sales. But we have also -- and we are quarter-on-quarter growing the business also in the service area. And in the report, you have seen that we have recently won and we have new services contracts that will start to contribute with around SEK 3 million additional revenue per quarter starting from quarter 2. So I think overall, we see -- start to see some traction on the A2D switch in U.K. We are also seeing good momentum in that product related sales. But as well, even though it's in the report, a little bit difficult to compare, we have underlying good traction in our service business. And these are the, like I said, the largest market, so it's good to keep an eye on. But we can go to the next slide and some of the smaller markets. But having said that, they are maybe somewhat smaller in comparison. On this slide, as you can see, these are also our high-margin gross margin markets. The Netherlands on a yearly revenue around SEK 100 million. You see a quarter SEK 24 million. And you can see that we provide a very solid gross margin. So this Netherlands is providing a very good profitability for the Careium Group. If we go to other markets, we have also here very, very attractive gross margins. So good profit generation from the other markets. They are smaller, they are fairly product oriented. So there can be a little bit of volatility between the quarters, but I believe they are also showing some good momentum with decent growth. I think that's kind of the quick summary and a little bit more insight into the markets, and I'm pretty sure with that, we are going to go to the next slide, and then David will provide a little bit more side. So David.

Well, thank you, Peter. And as you said, now an update on the profitability for the first quarter. EBITDA amounted to SEK 30 million compared to SEK 34 million for the same period last year, reaching EBITDA margin of 13.7%. EBIT amounted to SEK 13 million in the third quarter compared to SEK 17 million last year, giving an EBIT margin of 5.7%. We see increased net sales that has a positive contribution to gross profit. However, we do have a higher cost base due to investments in structural improvement initiatives that Peter mentioned before, that has an impact on the EBIT in totality. Note that last year included a onetime accrual in the U.K., impacting overall profitability, adjusted for this, we see that gross margin EBIT and EBITDA increased in this quarter compared to last year. Profit for the period was SEK 8.4 million, and 7.5 million last year. With that, moving on to the cash flow on the next slide. Cash flow from operating activities amounted to SEK 7 million in the first quarter compared to SEK 19 million for the same period in 2025. The lower cash flow from operating activities mainly driven by buildup of working capital to more normalized levels in the quarter. Cash flow from investing activities amounted to SEK 21 million in the period compared to SEK 24 million last year. As a result of this, free cash flow decreased SEK 40 million in the quarter compared to a decrease of SEK 4 million in the same period last year. Cash was SEK 38 million, and net debt was SEK 170 million at the end of the quarter. And with that, I hand over to Peter for some quarterly summary and concluding remarks.

All right. Thank you, David. So we can go to the next slide. Here we go. Yes. So if we try to summarize a little bit like I started this presentation, I think. We see that Careium provides a solid growth with almost 11% underlying. We are growing the product sales. We are growing the services sales. Profitability is decent, considering that we are investing in those internal initiatives. So I think in that perspective, a positive development in quarter 1. If you look at and talk a little bit about some of the challenges that you can potentially see in the report, and it's -- that we are a little bit hampered by some of these early investments in positive and large Norwegian contracts, but they are a little bit upfront cost heavy for us. We need to invest into these customers, but it's long-term contracts, but that's going to influence us short term. We have also somewhat higher cost structure that -- like we have communicated earlier that during quarter 1 and quarter 2, we are probably going to uphold that slightly higher cost level. And that's what you can see in the report. And that might also influence the cash flow a little bit. And considering that we had a very good cash flow in quarter 4, it's somewhat lower this quarter. So that's maybe some of the challenges. Now for the quarter. If we look ahead, yes, as you -- maybe I should start from the bottom since we have a new appointed permanent CEO starting 1st of June. What I'm going to do here during the last couple of weeks or months is, of course, to be part of -- trying to make a good handover as possible to the new CEO and part of that is, of course, to introduce and documentation and part of the organization that's working on all these initiatives so that could keep its momentum that the organization is doing very well. It's also to keep a focus on -- like I alluded to earlier here today on the continued focus for Careium of the analog-to-digital switch, for example, in U.K. because there could be a positive development for Careium. You might have seen some news as well this week related to our Nordic operation and the Swedish operation related to the ADDA framework. And what has happened there is very much correct. ADDA has -- it's called in Swedish, like an award intention. So a certain number of suppliers have received an award intention letter from ADDA but there is a -- it's called [Foreign Language] in Swedish. I'm not sure about -- like a grace period until actually today, the 23rd of April. That means that none of these suppliers have -- no one has signed an agreement with ADDA. That can only happen after the 23rd of April. Now you can consider whether Careium is one of the companies who have received this award intention letter and yes, that's correct. But we have not signed a frame agreement yet. We have not been able to do that. No one has done that. As soon as we signed the frame agreement, which is now more likely, then we are going to communicate that to the market. So you can feel comfortable that Careium had signed the contracts. And as ADDA communicate on their website, they at least have the ambition that this should go live from approximately 15th of May. So that tells me that most probably these award intended suppliers will try to sign the frame agreements between 23rd of April until the 15 of May. And as soon as we sign a contract frame agreement with ADDA, we will let the market know and everyone knows. I think that's what we kind of had today as concluding remarks. So maybe we should open up for questions.

Okay. Thank you so much, Peter and David, looks like you are well positioned for 2026, the rest of it. And by that, let me welcome Alice Beer, she is equity analyst at ABG Sundal Collier.

So starting off just first on Norway. You mentioned upfront cost and margin pressure from onboarding this large Norwegian customer. Could you -- dual question, I guess. Could you firstly, quantify the one-off costs associated with this? And at what point does this customer become margin accretive? And then also, what is the steady state sales and margin contribution look like once fully onboarded? And how does the contract structure compare to your typical Nordic bundled agreement?

A lot of questions there. I mean we don't comment exactly on the numbers as we have not decided to -- it's more explaining why the margins in the Nordic looks like they do right now. What we can say is that we are almost done, there is some kind of lag in costs. So we expect the more one-off related cost to kind of go down here. So I would say the Q2 is the last quarter where we will see effects of that. That is mainly the big year. And it's related to that we go out to all the users, so to say, and put out new products, replace the old product and put in new products. So it's a onetime thing that we do once in the start of the contract. That's why it's a little bit capital heavy in the beginning.

Okay. Moving on then. We've talked quite a lot about R&D spend and we know it's up and you apply for this. But could you be specific about what's being built? And what's the expected capitalization versus expense split going to look like going forward? Just could you -- when can we expect these investments to translate either to your revenue or measurable cost efficiencies? Could you just expand on the actual R&D plan?

I can expand a little bit on what we're actually doing, and then I'll let David tell you a little bit more depending on what he is willing to tell you related to CapEx, OpEx, et cetera. But like we wrote, I think, in the quarter 4 report, some of the initiatives has to do with -- you can see, I would say like this, Careium is a rather young company, a little bit more than 4 years ago, there was a lot of fragmented acquired operations and with some different operational models, business models, et cetera. But they are all depending on the technology. What we are working on right now is to make sure that the software that is actually catering for connecting our hardware with alarm centers, et cetera, that we can run that in all markets in a very efficient way. You can consider, for example, activation of products, provisioning of products, the better we can do that with modern technology and do that in the same way in all markets, then you can run your business in a much more efficient way. That's one positive from a financial operational perspective, but probably also going to improve the customer offering and the ease of use for the end user. We are serving our customers or many times the municipalities or care companies, but the end user is actually elderly people. The easier we can make it for them and the more efficient we can run our operation this is kind of the whole intent with a lot of that tech development modernization. So it's actually how we can build the software a little bit smarter, utilize modern equipment and tools to enable this throughout all the operations of Careium. So that's why we -- yes, that's what we put in some of these initiatives and more related to software and R&D. So a little bit, Alice, again, a little bit of short-term pain. And I think that's what I mean is strong with this report. We do all this work and my hope is and the intention is that we should long term get some very good both user benefits as well as a more efficient operation.

Okay. Perfect. And moving on then, I guess this might be hard to answer, but just could you give us a framework of thinking about where normalized margins should land, I mean it's mid- to high single-digit EBIT long term right through the cycle target? Or should we be thinking higher with more scale? Or sort of just could we get any color on both timing and some sort of actual figure for where you aspire to be?

No, David will be afraid that I will say something here since it's obvious that I am leaving. So I think I will hand it over to David.

Yes. I mean we've decided that we don't communicate any financial targets for 2026. So we try to kind of put it into words in the quarter report, and we will continue to do that. We -- as Peter mentioned, we're doing some initiatives right now. And we definitely see, as Peter mentioned, that we can gain both cost savings and efficiency improvements going forward. So with that said, we definitely see that we can have higher margins than we have today.

Okay, fair. You mentioned possibilities for M&A given the current debt and cash flow situation, what is your realistic M&A capacity? Do you think you have the about the rights -- or how do you think about the right leverage ceiling when you're simultaneously investing heavily in organic growth?

I mean I would say we are well positioned. I would say we have sufficient cash. I mean, we -- I think we are at the healthy level right now. If we can generate some more cash flow, we can lower the net debt as well. We could facilitate smaller acquisitions. If we do a bigger ones, I will probably say that we look at other sources of financing.

Okay. Perfect. And just a final question for me. you added roughly, I think, it was about 16,000 connections in the quarter. It was very strong in the Nordics as well. But service revenue growth was about 2.3%. I mean when you think about revenue per connection, is that falling? And could you explain this dynamic, it's a mix shift towards lower ARPU contracts? Or sort of what's happening on that side? How should we think about it?

I would say that as a growth percentage, it's hard to compare. That's why we're noting a little bit that last year, there was a one-off in the U.K. for the service business. So like U.K., for example, adjusting for that, we did have growth on the service sales. So it's a little bit hard to compare year-over-year on that term. I think it will be easier to understand now that we don't have the full financial lease effect either. So like quarter-on-quarter now, it will be probably much easier to understand.

Thank you so much, Alice, for your participation. And by that, we are moving over to equity analyst from the bank, SEB, Fredrik Reuterhall, please welcome with your questions.

So I just want to do a follow-up first from a question of Alice. The initiatives that you launched last quarter, how many quarters are left in that, would you say? I mean, I understand it's continuously progress, but are you done like 50%? Or can you talk more about that?

I would do that in a little bit even though my time here is limited, but I have initiated them, Fredrik. So I would say, as we have communicated, the main part of the cost here as we have so far communicated is quarter 1 and quarter 2. Some of these initiatives are going to take a little bit longer. But I mean, what we have communicated is that somewhat higher spending on it related to it is mainly for quarter 1, quarter 2.

And I would say that, as Peter mentioned before, I would say the initiatives and it could be within R&D and so on. It's about also gaining efficiencies in the organization. So it's more efficiencies will follow on the initiatives.

Okay. And I guess, I mean, of course, it's going to be a turn on better efficiency, but will we see it in the margins as well? Or is this more like more efficient and you can cut costs within the company?

Yes. But like I said, Fredrik, it's a combination here of doing some of these initiatives will make Careium a more European unified company that's going to be able to run in a more efficient way. There you go. That sounds like margins have potential in a positive direction. We need to invest a little bit to securities and I think that's what we tried to say in the report. We are now working on it. We have communicated. We're going to have somewhat higher cost levels in quarter 1, quarter 2. You should not calculate that all the benefits from this, some of them that might take 12 months, 18 months, some of it, it's going to get, probably -- most probably somewhat better and better over time. And so far, we have just said that the main part of the cost related to this is related to quarter 1 and quarter 2 of 2026.

Okay. Got it. The Nordics was very strong, and I assume it's back of Norway. And would you say the large order there for us and Baerum is fully up and running now or?

Yes.

Like David said before, I think you said that we are still investing initially upfront investing with the customer also during quarter 2. From there, we should have an up and running long-term contracts.

We have the full sales, but we do have a higher cost base than we will have going forward in the quarter.

And then I have some more general questions. First, on average for your customers in the Nordics, how many years would you say they are on a contract, it's like 3 to 5 years or shorter?

You were cut off a little bit in the beginning. So can you repeat?

Sorry, yes. I have a question on the average customers in the Nordics. How many years are they on a contract?

It's very different between Sweden and Norway, I would say. So in Sweden, I would say, 4 to 5 years. Peter, you can correct me if I'm wrong, while in Norway it's longer.

Okay. And then I'm a bit curious, how many of these customers do a renewal of the first contract? I mean, is it -- can they do it renewal? Or do they need to work on the contract again or...

Okay. But -- and without going into too much detail, Fredrik here. So like David said, yes, there's quite a difference in the structure of the contract between Sweden and Norway. What I have found during my time here and then in starting to analyze a lot of these contracts is that there is a very high percentage that are renewing. If you look at some of the customers who have been with Careium even though I say we are -- this is a young company. It was also an acquisition from the beginning. Many customers have been -- many customers are renewing their contracts with Careium. And there's a difference, but -- so I don't dare to say any average, but you can have X number of years plus a potential option to renew 1 or 2 or 3 times. And I'm just saying that -- what I found is that there is a high percentage converting positively into the renewal cycle of the contracts.

That's good. And then I have a question regarding the hardware that you install and lease out to your customers. How many years do you use them before they need to be replenished?

Also very much dependent on the market. I mean, we see -- like in the U.K., for example, what we see is that people are still using kind of very, very old products. So it's -- some markets use them until they no longer work and then they have to switch digital products instead of going analog or I don't know, I'm not a technical expert, but kind of copper wire products. I don't know what the right term is, while in other markets, it could be that once you do a renewal or like a new agreement, it's also part of swapping products. So it's very much from market to market.

Good, good. And then I have a question regarding the ARPU. You have a picture in the annual report. That was pretty interesting, I think, where you said that CARE transforms from reactive to predictive. I just want to ask you how many years do you think before the large part of your revenues come from today's reactive to more proactive and predictive?

Do you want to answer that, David? No, that's a good question, I think, Fredrik. And I don't know. I can relate to it having been out in several of these markets. I mean, remember some -- like David mentioned, some of the markets are still on analog technology, old copper wire technology, that's not related to Sweden nor the Scandinavian market, but other European markets are. I mean if you look in Central Europe, if you look in U.K., there's still a lot of people on copper. The first step is to bring them into a digital environment. Then I think the industry will see, but this is not going to happen overnight. There might be positive attributes from being able to work on a little bit more proactive way, but that's going to require digital solutions, technologies, et cetera. So I think you're right, the industry is going in the direction, but I don't have to tell you exactly when and how much that's going to contribute. I think right now, there's a lot of talk around it, and let's see how that plays out. I think Careium is in a good position to be able with a lot of digital products. That's a good starting point to be able to see how this can broaden potentially the offerings, et cetera. if that starts to take off in that direction. So I think that's kind of my -- trying to have some kind of balanced answer.

Yes. Yes. Understood. I mean in the past you push for U.K. firstly up more to proactive, that's going to increase the ARPU pretty significantly, I would say. So that's interesting. I just have one last question, actually. In the presentation from the Q4 '25, you listed under on the priorities ahead to increase focus on your early announcement platform, the i-care, we talked about it before. Can you remind us of the status of the platform? And do you have any time line when it will be fully developed?

Yes. But yes, I know there's a lot of historic communication around this platform. This -- I keep contained within some of these positive initiatives, this specific platform is an alarm handling platform, so meaning for alarm centers. There are -- it's twofold. I mean, we are already utilizing this platform. You can consider it like a standard SaaS platform, and we have already implemented it in our Swedish operation. We are on our way to implement it in our U.K. ARC, meaning our own alarm center. This will provide Careium with very beneficial cost savings because this platform we have developed ourselves from one of the former acquisitions. What we have done in these initiatives is also to commercialize this offering because it's a great platform. And there are hundreds of alarm centers throughout Europe. This could be a road in for Careium in different markets. from another perspective, but it can also provide Careium the possibility to sell a standard kind of SaaS platform, so a software with a recurring business in the care market and providing long-term contracts with recurring revenues for a very critical industry niche critical software where Careium is very strong. We have just commercialized it, and we are starting to talk also to external customers. So we'll keep you updated when that materializes both if we can provide clear internal savings from it, but also if we start to bring in more external commercial customers on it.

Okay. That's good. And just to confirm, I read in -- I think it was the annual report 2004, that the MD Medicus in Germany should be fully up and implemented now. Is that the case? Or is it still not?

Then you're probably read in 2024. No, not 2004. Fredrik, I will be a little bit careful here. I was not here. I have not communicated that. I think there was an intention that they were going to be one of the early potential external customers. We have them as a customer. We are selling products. We have a good relationship. Let's see if they're going to be the first external customer or if it will be someone else, but we will keep you posted.

Peter and David, there are some questions from the viewers. I will raise a few of them. If -- like you said, it's possible to sign the framework agreement after today's date. In time, when do you see sales in Sweden being positively affected from this finalized framework agreement?

What -- hopefully, we are, and we have all intentions to sign this frame agreement. That means Careium sits on a very large customer base and market share in Sweden, signing this frame agreement at least keeps us -- provides Careium with a long-term continued possibility to win new tenders. But remember, Careium has a large market share, not -- this is only for new tenders coming up, then it's important that Careium is there. But Careium has a large customer base, not all customers and municipalities are going to start to do new procurement processes from 15th of May. No, it's only for the ones who are going to do that in the future. But then -- so from that perspective, it's important but remember, Careium has a long-term relationship with -- and a strong market share. So -- but this will put Careium in a good position, being able to do new procurement -- win new ones.

Okay. Thanks. And there's another question connected to this. And how many municipalities are you active today in Sweden?

I don't dare to tell -- I know, but I'm not sure that this is a public information.

Exactly.

Moving on to other markets. How are they performing in specifically Germany, France and Spain?

As you saw, some of them are -- or most of them, the countries you're mentioning, we are reporting under other markets. And I think we just presented that they have a solid -- it's fairly much product related. This is not countries where we have our own alarm centers, et cetera. But I think we demonstrated a fairly decent growth in the first quarter, double digits. So positive development, absolutely.

All right. And can you provide us with the ballpark figure of the temporarily elevated costs you expect in H1, first half year.

We don't go into details on those kind of ones.

I think we stick to what we have communicated, and you can get some -- you get a little bit of guidance in the quarter 1 report and we have said quarter 1, quarter 2.

Okay. In Q4, you said that analog digital switch in the U.K. was putting a pressure on margins. How was that elevated during the first quarter?

But I think you -- or maybe I should hand it to David, but I think it's also highlighted in the report. You see a somewhat lower gross margin in the U.K. And part of that has to do with the volumes that are starting to be on the market and the pressure on the market to win these analog-to-digital switch -- customer switching there. So it's in line with our expectations and the market dynamics, I would say, and we see some -- a little bit of signs on it in the -- already in the quarter 1 report.

And a final question. When it comes to acquisitions, could you give us any hint on what kind of companies or geographical areas you're looking at?

We don't comment on that right now.

Okay. Thank you. That was my last question. Thank you so much for your presentation and all the answers and see you again in 3 months.

Thank you.

Thank you.