Framery Group Oyj (FRAMERY) Earnings Call Transcript & Summary

Hello, and welcome to follow Framery's Q4 2025 Earnings Webcast. My name is Samu Hällfors. I'm the CEO of Framery. And together with me, I have Lauri Isotalo here, our Chief Financial Officer. Today's agenda is to have a brief highlights on the business and strategy execution last year and especially Q4 last year, after which I will hand over to Lauri Isotalo, who will go through the financial performance in more detail in Q4 2025 and the full year 2025. After Lauri's presentation, we will have a Q&A session for which you can leave comments and questions in the chat function of the webcast. But to kick off the highlights of last year. The fourth quarter of the year was strong for Framery in terms of revenue and profitability, especially considering the volatile trade environment globally. Both full year revenue and adjusted operating profit were in line with the guidance provided in the prospectus of the IPO last year. The growth continued on global scale, demonstrating global demand for our new product line and strong growth in the market environment. I will go through more in detail each market area in the following slides. But to kick off with the kind of key figures, our revenue landed at EUR 58.2 million and grew from EUR 49.6 million last year in the same respectable time frame, which represents a growth of 17.2%. Now growth at comparable exchange rates would have been 21.5% or representing EUR 60.3 million of revenue for the Q4. Adjusted EBIT landed at EUR 11.9 million, which was -- declined from last year from EUR 14.6 million or 20.4% now in '25 and it was 29.3% last year in 2024. It's good to highlight that 2024 numbers were benefiting from super kind of beneficial exchange rates and a multitude of positive factors. The operating free cash flow was EUR 17.8 million, representing a cash conversion of 133.3%, up from 83% the year before. For the full year, the revenue landed at EUR 221.1 million (sic) [ EUR 222.1 million ], up from EUR 162.1 million year before, representing 37% growth over previous year. Growth at comparable exchange rates would have been 39.5% or EUR 226.2 million. The adjusted EBIT for the full year was EUR 50.5 million, up from EUR 33.0 million year before, representing 22.8% growth or up from 20.4% year before. Operating free cash flow for the full year was EUR 51.6 million, up from EUR 26.6 million and the cash conversion for the full year was 91.6%, up from 68.9% year before. Looking a little bit on the drivers behind the numbers. First, for the fourth quarter. The strong revenue growth continued, as mentioned, increased by 17.2% to EUR 58.2 million, which then was driven by the good demand from the market. The adjusted EBIT amounted EUR 11.9 million, which was a decline from last year from EUR 14.6 million. This was mainly driven by the strong comparison period with very good currency rate development and Q4 '25 faced weakening U.S. dollar and the impact from U.S. import tariffs, among other things. Now we conducted a series of price increases during the H2 last year. And not all of these have yet kind of fully impacted our profitability in the fourth quarter as the last price increase went into full effect and was executed in January 2026. We estimate that all of these increases will have full effect by the end of H1 this year. Now taking a look at the full year highlights. The full year numbers have a strong 37% revenue growth to EUR 222.1 million and the growth at comparable exchange rates would have been 39.5%, as I mentioned before. Now this significantly exceeds the estimated 15% compound annual growth rate for the core office pod market globally and represents a good performance for our company compared to the market. Adjusted EBIT was EUR 50.5 million with a good growth from year before. Now on top of the market growth and good performance in organic growth, we have had a very strong year in terms of largest global key account developments last year. Our consistent focus in global key account development has delivered significant results and including one particularly large key account, the largest key account last year had a multitude of different office projects in global scale, then boosting our growth last year to high numbers, that this needs to be still kind of underlined that the growth was not reliant on this particular customer alone, but our growth rate, excluding this customer was 19.5%, exceeding still the estimated core office pod market growth globally. Now one other kind of highlight of the full year was the amount of usage our pods were receiving from our end customers' people. Our new smart pods hosted more than 27 million meetings or work sessions held in the products during the full year, which then represents more than 1,344 years spent inside of our products globally just last year alone, a significant testament of the value and the user experience that we are delivering to our customers. Now the regional performance. From EMEA region, the market growth was still strong, and the revenue increased by 19.5% year-over-year to EUR 118.3 million from EUR 99 million year before. And the Q4, the revenue grew 9.6% year-over-year to EUR 31.7 million from EUR 28.9 million year before. The comparison period for EMEA year before was a very strong one. The performance met expectations and the demand was broad-based across the countries and customer segments in EMEA. Now for Americas, the growth was especially strong. For the full year, we grew 52.0% year-over-year to EUR 65.9 million from EUR 43.4 million year before. And Q4, the revenue grew 46.5% year-over-year to EUR 18.5 million from EUR 12.6 million year before. And we expect the market growth to continue in the Americas despite the uncertainty related to tariffs and market environment. Now growth in APAC was very strong full year. So we grew 91.8% year-over-year to EUR 37.9 million when the comparison period was EUR 19.8 million. Q4, though, decreased slightly, 1.4% year-over-year to EUR 8.0 million, but it's good to highlight the strong comparison period from Q4 '24 and the kind of -- and the market area being mainly driven by large customers and large projects, which then lead to larger variability in market growth and revenue growth when comparing to other market segments in our business. Then some strategic highlights and innovation and how we implemented the growth strategy last year. Just to recap our growth strategy, we have 2 main themes in our strategy. First of all, we have the best pods and smart office solutions, which is the offering side of the strategy. And then the second main theme is the effortless global availability, meaning the sales channel and go-to-market of our business. Under these themes, we have 4 different strategic initiatives to strengthen our leading product market fit in all market regions in the pods business to drive the adoption of smart office solutions to scale the Software-as-a-Service business. And then on the go-to-market side, we have 2 different initiatives. First, to drive growth through the tailored go-to-market strategies in all market regions, which we have 44. And then fourthly, to deploy the Framery Subscribed model globally with dealers in each market area. To take a look at how we then performed. First, taking a look at the offering side and the pod business, especially. As a recap, we have different kinds of product development projects ongoing, which are driving the market and driving our performance and competitiveness in the market. We have now 4 ongoing projects in completely new product concepts, which we hope that will lead into new product launches in the future. Then we have one ongoing major product update ongoing in the development pipeline and then 4 different minor product updates that we work on continuously. And then we have a strong future project pipeline when we kind of complete these projects, we will start working on the next ones. Taking a look at what we then executed and what we launched last year in terms of the core business. We launched -- the biggest launch was Framery One Lounge, which is a kind of new interior option and adaptation of Framery One, which is a more kind of home-like residential -- blend of residential and commercial comfort for the office for longer sustained use in one person products. Then we launched 3 different minor updates for the products, which improved the value we are able to provide for our customers. Highlighting the fact that our innovation work is constant and continuing and will lead into new launches on a regular basis. Secondly, we take a look at the second initiative, which is driving the adoption of Smart Office solutions to scale the Software-as-a-Service business. Last year, we were super busy launching new features and new products to the software side of the things, increasing constantly the value that we are able to deliver to our customers. To highlight a couple of them, we launched in January, the Framery Room Display, which is essential part of the Smart Office solution, enabling our customers to implement the Smart Office solution to their built meeting rooms and outside of our own pods as well. Then secondly, I want to highlight a second launch, which was the Space Overview. Basically, a screen that provides at glance which rooms at the office are available right now. And this is something that is quite unique to our Smart Office platform, providing real-time availability information for the whole organization at the lobby areas or wherever customers want to place these screens. Then taking a look at the third strategic initiative to drive growth through the tailored go-to-market strategies and to expand our dealership landscape. We had 2 major highlights and major kind of -- that I would like to point out. First of which is 53 new dealers purchased and put showroom units into their showrooms globally, expanding our visibility and footprint in the global scale and expanding places where our customers can go and purchase our products and try our products before purchasing. Secondly, I want to highlight the high dealer Net Promoter Score of 81 according to our own survey done for our dealers, just highlighting how happy the dealers are in working with us and driving their business together with our products and our services. Then the fourth strategic initiative is the Framery Subscribed. And last year was the first expansion year outside of our home markets in Scandinavia, when we were able to expand the business to 5 new countries during 2025. Now today, the model is available in 8 countries, and we are looking into expanding it even more rapidly in the future. And finally, taking a look at this year and how we follow up with the strategic initiatives. Our focus area this year is the strong product development focus. We are super excited about the projects that we have ongoing, and we hope that we can then get them ready for the launch when the projects mature to the launch phase. Secondly, we are continuing the world-class sales strategy execution, having tailored strategies for all of our 44 different market areas and expanding our footprint in the dealership landscape even further. Thirdly, we are continuing to drive the customer adoption and the recurring revenue with smart office solutions, building new business line, building recurring revenue base for our business. And fourthly, continuing the expansion of recurring revenue from Subscribed by opening new markets and then making sure that the new opened markets perform really well in the future and during this year. And this concludes the strategic highlights and business highlights on my behalf, and I'm handing over to Lauri to go more in detail through the financial performance of Framery.

Thank you, Samu. Before jumping into the last year's and Q4's numbers, I want to highlight a few things about the successful IPO we did back in December. To put it in scale, we had the largest Finnish IPO since 2018 when calculating by first day market capitalization as well as the largest Finnish IPO since 2021 by the transaction volume. And in fact, it was among the 5 largest IPOs overall in Europe last year. So with that, it gave us a very good position for this year in the capital markets. Then when looking at the last year's numbers, starting with the revenue, Q4 was a strong growth quarter, landing into EUR 58.2 million in revenue, growing from the previous year's EUR 49.6 million, again, highlighting the demand for the new product line globally as well as our ability to deliver it anywhere where the customer needs them. With that, it concluded a very strong growth year last year, where the revenue landed at EUR 222.1 million, which means a 37% growth from year before. So our market position was very strong in a growing overall market. And the growth is very much visible in the adjusted EBIT as well. Although in Q4, the adjusted EBIT decreased to EUR 11.9 million from EUR 14.6 million on the year before, mainly due to the exchange rate development and the U.S. tariffs, which, of course, meant that overall last year, the trade environment was rather volatile. But even in that market, we were able to effectively counter with both price increases, supply chain optimization, meaning that the total year adjusted EBIT increased to EUR 50.5 million from the year before EUR 33 million. This means that for the whole year, the EBIT -- adjusted EBIT margin also increased even if in Q4, it decreased from the year before. So highlighting that already our ability to navigate even in the trading environment as we saw last year. From the key figures, we'll go shortly more on the balance sheet items, just highlighting the earnings per share, which landed at EUR 0.26 per share for last year. When looking at the balance sheet items in more detail. And once again, our very flexible, very scalable operating model ensures that while the revenue grows as quickly as it did last year, we don't have to increase our capital employed nearly at the same pace. So last year, specifically, for example, our adjusted EBIT grew 53%, while at the same time, the capital employed only grew by 9% over the same period. And meaning, of course, that the return on capital employed increased even further from the already very good level from the 93% level in 2024 to the 130.9% for last year, highlighting that both need for the -- whether it's fixed assets or the net working capital are very moderate even on the fast growth pace. Similar story continues in the cash flow. Last year's cash flow was excellent as the -- driven by the high profitability and with that, also the very high cash conversion. In Q4, for example, the operating cash flow was EUR 17.8 million, representing our cash conversion of 133% as the net working capital went down over the same quarter. And even when looking at the full year, the operating free cash flow landed at EUR 51.6 million or 91.6% when looking from the cash conversion point of view. So once again, meaning that even when we are growing very rapidly like last year, we are able to do it profitably as well as with the high cash flow. At the same time, net working capital was actually flat over the whole year. Investment needs were moderate at EUR 3.1 million. And the leasing liabilities or the repayments of lease liabilities stayed rather flat at EUR 1.6 million, all contributing to the high operating free cash flow. The free cash flow as well as, of course, the primary portion from the IPO are very much visible in the decreasing leverage and overall, the strong financial position the company holds. The net debt was relatively steady at EUR 66.9 million at the end of last year, and that includes the strong cash position of EUR 19.8 million in cash or cash equivalents. With the growth in the adjusted EBITDA, the leverage went down to 1.2x during the last year. And now that with the new financing agreement in effect, the financing costs are lower going forward. And overall, the financial standing and the position of the company is very good. From that to our, again highlighting the mid- and long-term financial targets. The company targets growth of more than 10% in annual organic revenue growth compared to the now 2025. In the midterm, we target the profitability of 25% in adjusted operating profit margin and with the leverage to stay below 2x in net debt to adjusted EBITDA, where we, of course, very much are already. And lastly, the dividend policy of the company is to pay out 70% to 90% of the net earnings, part of which may be done through share buybacks as well. And with that, the Board's proposal for the dividend for this year for the AGM is to pay EUR 0.23 per share, which will be paid -- would be paid in one installment in May of 2026, which represents 89.3% of the net profit from last year. So with that, we are very happy to take any and all questions you may have on both the Q4 as well as for the whole year in total.

And we already have a few questions here waiting. So is the growing use of AI visible in customers' buying behavior?

Well, not really in any other sense than in a sense that we are obviously having customers in that segment as it's growing very fast. We are seeing more and more orders coming from that segment from customers. But from other point of view, no differences so far.

Could you please quantify the tariff and FX impact on profitability in Q4 and open up how the change in the euro-USD impacts the balance sheet items? And how is this then reflected in the P&L or profitability? So while we don't quantify the exact figure on the FX or the tariff impact in Q4, it, of course, had a significant impact as our price increases were partly coming in force over the second half last year and of course, now the last -- or the rest of them coming in force in the first half of this year. And so -- but I think one way to look at the FX impact is, of course, through the impact it had on our revenue when looking at the same exchange rates as if they were -- would have been the same as the year before. On the second question on the euro-USD impact on balance sheet item, so its effect especially comes from the receivables and inventory held in the U.S. So those balance sheet items are then changed into the euros as per the latest exchange rate, and hence, they have the P&L impact in the -- as well and not just balance sheet impact. How would you describe demand environment end of '25 or start of '26? Any indications of market growth slowing or accelerating from '25 average? Any indications how you -- how the largest key account sales should develop during the first half '26?

We are not giving the short-term guidance this year, and that's not the policy. But if you take a look at the kind of how we have seen the trends develop last year, we haven't seen any significant alterations from the trends that we've seen throughout the last year and maybe even longer period of time. We are looking at the development of the market optimistically as the trends are the same and seems to be affecting the market as they have until today. Now the one particular big customer, we don't comment kind of specifically, but they are a long-term customer. They have been our customer for 10 years or more than 10 years, and they've been ordering pods through the 10-year period of time, and we have no reason to believe that would completely cease as of today, and we look at the future in a positive way as well. That being said, last year, I believe, was exceptionally strong with that particular customer.

You mentioned focus on global key accounts. Do you think that you could have multiple clients contributing several percentages of revenue in the near future?