Careium AB (Publ) (CARE) Earnings Call Transcript & Summary

Welcome to this live streamed quarterly presentation featuring the welfare technology company, Careium. Following the presentation, there will be a Q&A session with equity analysts, and investors can submit their questions via the chat. And I will address as many of them as time permits. And with that, it's time to welcome Careium's management, CEO Tove Christiansson and CFO David Granath. Welcome. And well, strong report. You have now been with the company for about 5 months. What is your view of the company now?

Yes. It's -- let's start with some reflections around that. I really think it's a nice company, and I've now been out meeting with colleagues and customers in all markets. And it's lovely to see the good relationships and all the trust we get from customers. Customers are there together with us. And I also see a company that has built on the strength of coming from local companies in each market, being close to the market, close to the customers. I also see the strength of being the first one being there in going for digitalization in Scandinavia with the alarm receiving centers that was really powerful from Careium and also with the good products that we have developed, and we see momentum with the mobile alarm products that we have out in the market. So I see a lot of good strength in company to continue to build on. And I also see that we need to, of course, be more efficient. We need to be working with our operational excellence, and we need to make sure that we scale that we can scale as a European company. So there are good things to work with and a fantastic company to be part of and being the CEO of.

I can imagine that. Thank you so much for that intro. And please go ahead with your presentation, and I'll be back for the Q&A.

Yes. Thank you. So let's start. Me and David will present the report together, and I will start, and then I will hand over to David. I think it's a report we are very proud of. It's a very nice product sales in it, and it's a good service sales in it, and we grow in all markets. And looking into the numbers, you can see that we are growing 22% on the top line. And when it comes to service sales, we have a big part of our service sales that is based on longer contracts with recurrent revenue in it. And if you see the growth over the year, you can see that we have the growth coming in from a couple of nice product -- contracts in U.K. and also the good, big contract we had from Norway with Asker and Baerum. Product sales, we see the momentum. We see the momentum we are selling much more from the Abby. We are step-by-step taking out Alba in the market. We see that it's part of the Adda agreement in Sweden. And we see also that we sell it and we see potential in the European markets. So we have a good growth, underlying growth in all markets and some kind of boosted sales on the top due to a couple of really nice contracts that we have in the market. That brings us to an EBIT on SEK 27 million. And yes, we are happy to meet 10% of the EBIT. So that is good for us. We did talk about it last time, the balance sheet that we have strengthened. We have -- we had the hybrid loan of SEK 64 million, and we repaid it for SEK 35 million, and the rest has been written off. So there are a couple of good things that we bring with us in this report. But let's start with markets and dig into that. Let's start with the Nordics. Nordics is a tender-driven market, a tender-driven market where the municipalities are buying in care services. Care services where products and services with our alarm receiving centers are bundled in a service contract. So these markets are really service-driven markets. And we see on the top that we are growing, and it's up on above 25% growth, but that also comes to when you look into going back to the quarter Q4 in 2025, you see that this is where we brought in Asker and Baerum into our service portfolio. So a big part of the 25% is, of course, driven by that contract. And it's a nice product. It's a nice service contract, and we can really see that we've been working with the margin in this market, and we are up on 41.5% in the gross margin. So we are getting there. United Kingdom, if we go to this market, this is a broader mix of what we sell. You can see we have more product sales and still a lot of service sales. Major part of the service sales is also here contracts, long service contracts with local authorities and care providers with recurrent revenue written and signed for a couple of years. So it's a good base in it. We do see a lot of activities in this market now when they are closing down and then going from analog to digital. And that, of course, is a lot of activities, and we are happy to see that we see the effect of the activities we are doing in the market. We can see that we get sales both in the product part and in the service part. Of course, we see in the service also that we have a couple of installation projects with lower margins to make sure to get it happen. And that's why it comes down to 37.7% in the margin that we are really making all we can to get on this -- onboarding the service contract and making sure that we go for digital products. Next market to talk about is the Netherlands. As you know, the Netherlands is mainly a service-driven market. We have a lot of good contract here as well. And here in Netherlands, we know we don't own our own ARC. We work with fulfillment with other ARCs. And still, we are fronting the customers, and we are having a good service sales as a growth engine in this market. You see though that the product sales has increased fantastic in this market. And I would like to talk a bit about that because we have -- we see that we have a momentum in the mobile devices with the mobile alarms that we are selling. And we see that these products are enabling our customers to have good services in the market and to target new target groups. And working with Gerust, it's one national alarm receiving center in Belgium. You can really see that they are focusing on younger elderly that really want to continue to live an active life and also making sure that they feel the security and safeness and can get support from an ARC when needed. So you can see in Netherlands, we continue to be a good service-driven market, but we also add some product sales to enable services with our customers. Other markets, other markets is mainly France and Germany from our side. And these are markets that we step-by-step are growing with our products. We increased with 21.7%. So it's a good nice growth in the market. And it can, of course, differ from quarter-to-quarter. Looking into this quarter, we see also momentum with our mobile alarm products. We see -- we get a lot of positive feedback and sales is growing with the new product. So it's really nice to see and we have a gross margin increase, and we are up on 62% when it comes to margin in other markets. So I would say, summarizing sales and gross margin for all markets, we are very happy with this to see the effect of what the markets have been doing, been working with. We see the effect of the top line growth, and it's 20% if you adjust it for currency, that's a good level. We see that it's boosted of the contracts from U.K. coming in, in the Q2 and Q3, and it's also boosted by the contract with Asker and Baerum in Norway, of course. But underlying, we have a nice growth in the company. And we see also that product sales is and will continue to be there as a good mix with our service portfolio. And as you see, gross margin increased to 45%, and that's an area we talked about last quarterly report and that we continuously work with being more efficient and trying to improve the gross margin. So 45% is good to be up on now. David, I hand over to you.

Well, thank you, Tove. And now an update on the profitability for the quarter -- for the third quarter of 2026. We see higher sales and gross margin, and that supported the strong profit improvement, and it enabled us to continue to invest in our future. EBITDA amounted to SEK 47 million compared to SEK 32 million for the same period last year with an improved EBITDA margin. EBIT increased to SEK 27 million in the second quarter (sic) [ third quarter ], giving an EBIT margin of 10.3%, as Tove mentioned, compared to 6.7% last year. Profit for the period was SEK 20 million versus SEK 9 million last year. And to summarize, we are happy to see the positive profit development. With that, moving on to cash flow. Cash flow from operating activities amounted to SEK 29 million compared to SEK 35 million for the same period in 2025. Improved profit in the quarter were offset by increased working capital. Investments amounted to SEK 15 million in the period compared to SEK 20 million last year. And as a result, free cash flow remained at last year's level and amounted to SEK 14 million. Cash totaled SEK 28 million and net debt increased to SEK 192 million at the end of the quarter following the settlement of the hybrid loan that we talked about in the last presentation. I would say we are well financed for our continued growth journey. And with that, I hand over to Tove for some concluding remarks.

Yes. Thank you. And yes, as I started, it's a very nice company, and we see a lot of good activities that we do run. We see the great effect of the work that we have been done. And in all markets, we are growing, and we have a net sales increase of 22%, which is a really good growth. Even if it's boosted, it's good. And that's also why I would like to highlight that we are growing with service sales. That is recurring revenue business for us, which is good to have. It's stabilizing the top line. And also the product sales where we see the momentum of mobile alarms, it strengthened us to have a good portfolio in this because the area of mobility in this sector is what we see a journey that we would like to take. We would like to be there with good products and services to make sure that elderly can continue to work and have an active life, be active, be free, feel safe, and that's an area where we would like to grow in. So we are proud to see that we get the feedback in a very positive way from the customers. Gross margin increased to 45% and EBIT is above 10%. So we are taking the company in a good direction. Priorities ahead, of course, we should continue to reach out and we should continue to work with the customer relationships that we have in the market. It's fantastic to strengthen. It's good to be there. With this dialogue, we will make sure to, of course, have the best offering out there and always supporting our customers in the whole aging journey for elderly, making sure that they can transform the way of working with care. And by that, we will continue to grow, of course, and we will also continue to improve the efficiency across all operations. And we will continue to invest in our offering to make sure that we have a scalable offering, a European offering and that we always balance the technology part in it and always make sure to have balance with the human to make sure that we are there for our customer in the best way. So yes, we are summarizing a good quarter.

Okay. Thank you so much, Tove and David. And with that, we will start with the Q&A. And first out is Alice Beer, equity analyst with ABG Sundal Collier. Please welcome with your questions, Alice.

Starting off on service sales, they were up 27% with connections up... Sorry, can you hear me?

Yes, we can hear you.

It's good.

Great. I'll reiterate. So service sales were up 27%, while connections were up 8%. How much of that is price increase, mix, and installation revenue? Just could you give us an indication of the underlying per connection growth?

I mean I would say we don't go into the details on that, but we do see that there are some nonrecurring service sales that we have that are on the high level now. We see it both in the Q3 and Q4. And mostly related to the U.K. 2D switch that we discussed before.

Okay. And on the Nordics then, gross margin took quite a jump in the quarter, but it's about flattish year-to-date. Is Q3, should that be considered like a new run rate? Or was that just a timing effect?

I mean I would say we see improvements. We've seen improvements in Sweden, partly driven by the less financial lease and the kind of shift in the dynamic of the P&L, so to say. But we also know, as we communicated before, that the kind of onboarding of Asker and Baerum is completed. Now it's more on kind of taking this long contract and continuously work on the margin, and we see some effect of that this quarter.

Okay. And then just to continue on Asker and Baerum. I mean they start invoicing in Q4 '25 as you wrote. How much did that add sales last year? And what's the Nordic organic growth sort of excluding that contract? Just any indication that we can size the Q4 comp step down?

Yes. Asker and Baerum invoicing is roughly SEK 10 million per quarter.

Okay, perfect. And then how should we think about the U.K. gross margin in Q4? I mean, how long should we expect sales to be driven by these low-margin installation projects? Is that something that's going to go into next year? Or is that pretty much over now?

I can start talking about the market and the business we are doing. There is high pressure in the market and the pressure comes from public. It comes from the whole industry and the customers are really putting all their efforts to find the best solutions. And it's a high competition out there. So it will continue, and it's said that we're going to close down end of January now, and that's the date everybody is working for.

Okay. Great. Thanks for the clarity. On a group level, more then, net financials were down quite a bit year-on-year. What's the normalized run rate for net financials now that the hybrid is gone?

The hybrid doesn't affect the net financials. This quarter, we only see currency effect. The hybrid loan only had an effect in the equity because we never paid the interest. It was only deferred.

Yes. Right. So that was just an FX effect, so we shouldn't expect the run rate to step down.

No.

Okay. And then I know that it's difficult to comment on cash flow, but working capital has weighed quite a lot on the cash flow this year. What's driving the inventory build? And when should we expect this to unwind?

I mean we are constantly reviewing our working capital. We see increases a little bit on accounts receivable and inventory, those are the areas we work hardest with. I mean, I would say inventory, given the situation that we have as well, I mean, we see not maybe such a big impact on the gross margins, but we see longer lead times. So we continuously work to have the best kind of inventory levels that we see for our future growth. And if that in some quarters are higher inventory, that is, but that is also what we see in the future.

Okay. And then going back to Q4 last year, quickly, just on a group level again, Q4 last year was very heavy on OpEx. How should we think about the comp going into next quarter?

I would say we are -- as we've mentioned previous quarters as well, I mean, we are at a fairly stable OpEx level for the year. I mean we saw increases end of last year where we did some investments in the organizations. But overall, I would say it's somewhat stable. Of course, we have summer periods where holiday pay and such could impact. But overall, it's fairly stable during 2026.

Okay. Perfect. And then just a final question that I'm guessing maybe you can answer, but we're going into the Q4 report and for 2026, you didn't really have any financial targets. And I guess this is more of a question for Tove. But I mean, you've been with the company for a while now. Should we expect maybe any strategic decisions or any sort of guidance for next year?

We are having a good strategic dialogue with discussions within the Board. And we think that we need to really stabilize and we need to make sure that we can continue to invest, and we are not talking about having financial targets in the public information. That's not what we see in front of us.