eEducation Albert AB (publ) (ALBERT) Earnings Call Transcript & Summary

Hello, and welcome to today's Finwire presentation with Albert. [Operator Instructions]. With that said, I'll hand the floor to you. CEO Fredrik Bengtsson; and CFO, Erik Bergelin. Please go ahead.

Good morning, and thank you for joining. I am Fredrik Bengtsson, CEO of Albert. And with me today is our CFO, Erik Bergelin. We will take you through Albert's reports for the second quarter and first half of 2026. After the presentation, we will open up for questions. So moving on. Let me start with the number that matters the most. EBITDA from continuing operations improved to minus SEK 1.6 million from minus SEK 6.6 million a year ago. That is a SEK 5 million improvement. And it happened in the half of the year where we deliberately invested the most. Group EBITDA was positive at SEK 2.3 million. This is supported by a one-off gain from the Holy Owly deconsolidation. The structural story is in continuing operations, and that story is SEK 5 million better than last year. Operating cash flow from the first half was SEK 8.1 million. Last year, the same figure was negative. We hold SEK 49 million in cash we have 0 bank debt. In February, we said 2026 will deliver a positive EBITDA and a positive cash flow for the full year with quarterly variation and the front-loaded investment profile. We followed that plan, but the numbers were only half of this quarter. The other half was direction. In June, we announced 3 things. First, mathematics is now at the heart of our strategy. We're launching a new stand-alone AI venture and we have initiated a strategic review of Swedish Film, and I will come back to each of them. Moving on, so first, the top line. The drivers are the same as in Q1, and I will explain them in the same way. Net revenue for continuing operations was SEK 35 million, down 4% year-on-year. ARR was SEK 125.6 million, down 10%. This is the trailing effect of 2 deliberate choices from the second half of 2025. We scaled back customer acquisition during the management transition, and we actively discontinued revenue that did not carry its own profitability. So no vanity numbers. In a subscription model, these decisions show up with delay. That is the mechanic. It's well understood, and it's exactly what we said would happen. The more forward indicator is invoiced sales. For continuing operations, invoiced sales were down 3% in the quarter and down 2% for the first half, broadly in line with prior year. This is an early indicator of stabilization. One note on reading the quarters. Our B2B invoicing allows larger contract negotiations and looking quarter-by-quarter, these can land on either side of the quarter boundary. Here, in this quarter, B2B brands more or less balanced each other. Let me explain why the first half looks the way it does on the cost side. Our revenue and costs are unevenly distributed across the year. The first half is when we invest ahead of seasonal cycle. And this year, we are investing with better data than ever. In Albert Junior the unit economics from the Finland relaunch and from our campaigns are favorable. Conversion holds, payback period holds, so we're doing what any disciplined operators probably should do. We are accelerating marketing investments where the unit economics are favorable, not everywhere, not for volume, but where the return is proven, cohort by cohort. That spending sits in the first half numbers. The revenue effect follows in the coming quarters. That is the business model and it's working as designed. On costs overall, same revenue pressure, SEK 5 million better result. That is our smaller and more efficient cost base doing its job. Erik will take you through the details of that. Moving on to next slide. Thank you. In June, we made explicit what has been building for a year. Mathematics is at the heart of our strategy. Why mathematics? Because it is where we have our roots, our data, our proof and our brands, 15 years of learning data. 10 million learners independently verified efficacy. And because mathematics is a challenge that governments and school systems are investing more in, not less. Falling math results are a political priority in every one of our markets. Sharpened focus also means higher demand internally. Each business within the group must be independently profitable, fewer subjects, fewer geographies, higher demands, and that logic also guided 2 decisions this year. First being Holy Owly, our French language learning subsidiary entered judicial liquidation in May. It didn't carry its own profitability and languages are not our core. And Swedish Film, and let me be precise here, Swedish Film is a profitable cash-generating business. It has served and it still serves the group well, but it's not mathematics. We have initiated a strategic review to examine alternatives, including a potential divestments with the aim of unlocking shareholder value and concentrating our investments where the growth potential is the greatest. There is no certainty that the review will result in a transaction. What remains is a group that is simple to understand, maths at home, maths in school and a new AI-powered venture that connects the two. Let me move on to the brand progress and give you some operational proof point from the quarter. Albert Junior relaunched in Finland. The launch was deliberately narrow, paid acquisition in selected channels, weekly cohort tracking and with scale spend only as long as the unit economics hold. Early cohorts are strong. Finland is now the template for how we reenter markets. That means disciplined, measured and profitable from the start. Sumdog signed 4 framework agreements with Welsh local authorities ahead of the Welsh language launch in September. I want to pause on that. These agreements validate 2 things at once. The commercial repositioning towards larger institutional accounts and our proof point because strong engagement and clear evidence is what opens these doors. Sumdog remains to our knowledge, the only math fluency platform with independently verified efficacy. In a market moving towards evidence-based procurement, that is not a marketing line. It's a structural advantage. These large agreements do not yet offset the ARR decline. Framework agreements are opt-in and endorsed by local authorities, but also very workload intense. Institutional sales cycles are long and revenue is recognized over a contract term. We expect the effect to become visible during next year. So this is a grind, and I'd rather tell you that honestly, than to sell you hope of a hockey stick. Film och Skola is the school and district brand of Swedish Film and they delivered another stable profitable quarter and continues to contribute to group cash flow while the strategic review runs. Now let me lift perspective because the sector context matters for how we value the opportunity of what we're building. The global market for mathematics learning is estimated at around $39 billion in 2025, projected to reach around $68 billion by 2033. The largest segment is ages 7 to 15, and that's precisely our segment. Two forces are reshaping this market and both favor us. First, evidence. The U.K. procurement is shifting towards proven outcomes and having proof that your product works is becoming a condition for the conversations. We are, to the best of our knowledge, the only one in our category who have it. Secondly, quality. In Sweden, the screen time debate is raising the bar for what digital learning must deliver. And that bar filters out engagement only entertainment products, it does not filter out products with verified learning impact. And then there is AI. And I know that is a swing buzzword, and I can relate to that. So let me tell you how we think about it. AI has collapsed the cost of building learning content. That means that the generic layer, the app itself is no longer a moat for anyone. What AI cannot replicate is what sits underneath, 15 years of learning data for more than 10 million learners. Independently verified efficacy, curriculum alignment built with pedagogical experts and engagement that remove the scare of learning math, makes it fun, make children want to engage without always knowing that they are step-by-step practicing, learning and mastering mathematics. And of course, the trust of families and schools in two core markets. Those are our moats. AI does not erode them AI makes them more valuable because they are exactly what a next-generation product needs to be built on. Next slide, please. Which brings me to the venture we announced in June. And let me explain where it sits because the logic is simpler than the word AI suggests. Today, Albert Junior serves children in the early years at home. Sumdog serves schools from age 7 and onwards in the U.K.. And between them, it's a gap. Children outgrow Albert Junior, families that love the product churn, and not because we failed them, but because we had nothing to offer them next. The new venture is built exactly in that gap. It takes over where Albert Junior ends, and it carries the child onward. From the early years up into secondary from home to the classroom, and that placement is wider risk profile is different from a typical AI venture. Two, synergies exist from day 1. First, the life cycle. Families that today leave the group can stay longer. We're not buying new customers. We're keeping the ones we already earned. And secondly, distribution. A broader math offering can be sold through Sumdog's existing sales organization into school relationships we already hold. So no sales force needed on that market. The venture is self-funded. We are not raising capital risk. We're not asking shareholders to finance an AI experiment. It is funded from our cash generating debt-free group. It's developed in a controlled way with clear milestones, we are now recruiting specialist AI engineers and learning scientists. Our goal is to make learning maths fun, engaging and effective. We want to give both parents and teachers the tools to help their children and pupils to a better future. Launch is expected in 2027. Revenue is expected first from existing Albert Junior and Sumdog customers and over time from new markets. We're not building for a market that we hope exists. We're building for customers we already have in the exact spot where we lose them today. Discipline is the strategy, and that was true in the restructuring. It is equally true of this. So to summarize. The first half was about investment and structural clarity. We invested in Q1 and Q2. We set the direction in June, and we did both while improving EBITDA, generating cash and staying debt-free. The second half is seasonally stronger, and we expect sequential improvement in line with the plan we communicated in February. Our full year targets remain positive EBITDA and positive cash flow for 2026 for a group and its current structure. Albert is becoming a simpler company to understand, mathematics at the core, more than 90% recurring digital subscriptions. Verified learning impact, a balance sheet that lets us fund our own development and a clear view of where value is created next. Every child deserves to be good at math. And for 15 years, we have shown it's possible. Now we're building the next chapter of that mission on our own terms and with our own resources. I want to thank teams in Gothenburg, Stockholm, London and Edinburgh, and I want to thank our Board and our shareholders. Thank you for your trust. We said that we would fix the company first and build second. The fixing shows in the numbers, the building has begun. And with that, I hand over to Erik.

Thank you, Fredrik. This quarter has been a lot about operational excellence, continuous review of our portfolio and building for the future. It's very nice to finally look more into the future and build a company that is on a growth path is profitable and a great place to work for all our colleagues. I will go through the net revenue, EBITDA, EBITDA margin, both for the total group as well as for our continuing operations to make sure we compare apples with apples. I will also go through our cash flow and cash balance. Starting with the net revenue. Net revenue for continuing operations came in at SEK 35 million, down 4% year-over-year. This top line decline is a deliberate trailing effect of our decisions in the second half of 2025 where we deliberately pulled back on unprofitable customer acquisition and cut non-margin generating revenue. Invoice sales from continuing operations are broadly stable year-over-year, giving us a clear early signal that top line trajectory is stabilizing as we enter our seasonally stronger second half. Continuing with EBITDA, group EBITDA returned to positive at SEK 2 million, up from minus SEK 10 million last year. Continuing operations improved to minus SEK 2 million. The trend here is very clear. And looking at the rolling 12-month accumulated EBITDA for continuing operations, we saw a swung from minus SEK 19 million to plus SEK 1 million, which shows the result of both our restructuring program in effect and our successful portfolio review. With top line growth as a focus going forward, we should see the trend continue. We're very happy that our restructuring program and portfolio cleanup are working. We're operating on a significantly leaner and more efficient cost base, which means that we can focus more on conscious growth. Continuing with EBITDA margin. Total group EBITDA margin reached 6% for the quarter. Continuing operations EBITDA margin improved by 10 percentage points year-over-year, moving from minus 15% in Q2 2025 to minus 5% in Q2 2026. The trajectory line is undeniable. We're steadily building a healthier structurally profitable subscription business heading towards positive margins. Now cash flow and cash balance. Q2 operating cash flow was minus SEK 8 million. This negative flow was fully budgeted, reflecting planned Q2 campaign investments that drive revenue for the coming quarters. For the full -- half of 2026 operating cash flow remained strong at plus SEK 8.1 million compared to minus SEK 2.7 million last year. We exit Q2 with SEK 49 million in cash and 0 bank debt. We're completely self-funded with the liquidity required to drive our core growth and AI initiatives. To summarize, the first half of 2026 was about sharpening our focus, prioritizing adaptive math at our core launching our stand-alone AI venture and enforcing profitability across every asset. And for our financial goals for the year, reiterating what Fredrik was saying, we reaffirm our full year 2026 targets, positive EBITDA and positive cash flow for the group. Thank you. Over to you, Fredrik.

Thank you, Erik. And with that, we open up if there is any questions.

Thank you for your presentation, now we open up for questions. The first one is sales dropped by 16% this quarter 1, will sales start growing again ?

Sales dropped with 16% is also due to the fact that we have sold assets. So that is comparing apples to pears. We are looking at, in invoiced terms, a difference that is somewhere 2% to 3%, which is not super much. So we are focusing on getting everything in order to scale during profitability. So that is -- profitability is still our main target and driver. We're starting to scale investments in market where we feel and see that ROI is sufficient. So we have no date, but we have the discipline in place. Investments are in place. The negative ARR development is expected to gradually abate. We expect sequential improvements in the second half of the year.

Thank you. Next question is you just started a new stand-alone AI project. How will this project make money for the company? .

As we said, we have quite a stringent way of looking at profitability investments. And we have derisked the investment quite heavily by adding this new venture as a stand-alone unit that provides synergies for both Sumdog and for Albert Junior by adding to the age where we can have Albert Junior customers stay longer and also to the width of the Sumdog customers, becoming more embedded as a mathematical platform by having more functionality, more services available to sell to existing customers. So that is the first part, and we expect that to be the first revenue drivers for this venture. But it is also built as a stand-alone units to go out in markets of its own. But there is -- this is too early to say anything about that. But we build on what we have, and we try to get the most of the investments we do in marketing and in personnel in the first instance. So that is our main focus when we approach the launch, which is expected in 2027.

You are focusing heavily on teaching mathematics. Why is math a better business than your other subjects?

Mathematics is the is the foundation of everything we do, basically. It's what started Albert 10 years ago, and it's also what started Sumdog 15 years ago. It is the subject we see the most traction in the most usage, the most customers. So it has been -- it's where we come from, and we also see that it's our future becoming sharper and owning mathematics for our target groups is a clear point in becoming a sharper company where everything we do and invest in gives us the maximum benefit in return. Also, as we saw in a previous slide, the market for mathematics is huge. The need is huge. We can see in PISA results, mathematical results falling and mathematics is a key foundation for most tech development for understanding and utilizing AI. So it's super important for any society to have the youth and the children in that company -- or in that country learn mathematics and understand it and not be afraid of it. And there is probably our major driver. We dedramatize it. Mathematics is something that many children are a little afraid of. It's something that erodes self-confidence. And by letting them engage with mathematics in a new way that actually couldn't be done without technology. They learn mathematics and they train mathematics and they become skilled at mathematics, boosting their self-confidence and their knowledge and also giving them a better future. So that is our main mission. That is what everyone here works for every day.

Thank you. Now we received a question that I don't get the sense, but maybe you can explain better. Further effects from Holy Owly in coming quarters or now fully out of numbers? .

Now fully out of numbers. Holy Owly was put in judicial liquidation during the second quarter. So it was a company focused on language learning in France. Basically, we had it in different markets as well, but unprofitable. And we're not looking for revenue numbers as a vanity, it has to be able to carry its own business. And it wasn't a focus and we did not see how to turn that into to a profitable and contributing business without heavy investments, and we were not prepared to do those investments because the risk is too high compared to what we have in mathematics.

Next one is, you are reviewing your Swedish Film business. Are you planning to sell it soon?

We have a strategic review in place, and we're exploring options. That means that we look at everything in that business. And we have no decisions of it, but we have been clear that we are reviewing the business as we also say that we are focusing on mathematics and Swedish Film is not in mathematics today. So I mean, everything is possible in the regards of Swedish Film. But it is very nice. It's a fine run company with a long history. It's got good traction in municipalities in Sweden. Also, that is one thing. It's bound to Sweden and to Swedish customers. And we don't today have the synergies we would hope for. So that is why we're reviewing that business. But no decision has been taken. And if and when any steps are taken that will be communicated accordingly.