QleanAir AB (publ) ($QAIR)

Welcome to the QleanAir Q1 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to speakers, CEO, Sebastian Lindstrom; and CFO, Fredrik Sandelin. Please go ahead.

So a warm welcome to the QleanAir Investor Presentation for Q1 2026. My name is Sebastian Lindstrom, I'm the CEO of QleanAir and joining me in today's call is Fredrik Sandelin, CFO at QleanAir. Fredrik and I will go through the presentation and then open up for Q&A towards the end. So starting off with the numbers for Q1. We closed a good quarter, but a quarter with significant headwind when it comes to foreign exchange. We delivered SEK 114 million in sales in the quarter, which meant a decline in reported numbers of 2.3% versus last year and as I said, we had a strong headwind on the currency side. In constant currency, we grew 10.6% in the quarter. We had some help on the U.S. cleanroom side from the Curexa settlement. But even taking that into account, we showed growth for the quarter. And more importantly, Cabin Solutions grew 5.7% and Air Cleaners grew 13.4% in constant currency. Our new products focused on solutions for critical problem areas of the industry are continuing to drive growth and to mitigate the difficult market conditions. Our recurring revenues were SEK 63 million, which from a reporting in Swedish krona looks far below last year's SEK 68 million. But again in constant currency, we showed growth to SEK 72 million. Our gross margin remained strong and healthy. All product categories are now above the 60% mark thanks to a higher rate of renewals on the air cleaning side, products targeting more critical problem areas of our customers and the cost improvements we made over the past 2 years in supply chain in Europe and overall in the U.S. Our EBITDA margin of 13.1% was behind last year's 14.3%. But taking out the benefit of Curexa settlement and adjusting negative currency effects and prioritization effects, we slightly improved. Cash flow was negative SEK 5 million even though we improved balance sheet items like inventory, accounts receivables. Fredrik will take you through this in more detail in the financial section. When it comes to EPS, our EPS was SEK 0.24 versus SEK 0.18 last year. So summing up the first quarter, our underlying business is developing well. We continue to hold our strong gross margin that we have improved significantly for both Air Cleaners and Cleanrooms over the past 2 years. In Q1 we had an extra push from the settlement with Curexa, which allowed us to release reserves which we had in our balance sheet back from 2024 when in our view, Curexa breached the contract. This helped compensate for the 2 cleanroom projects that have been delayed from Q1 this year to the first half of 2027 and for the negative currency effect and prioritization effects on personnel costs from '25. As we now enter into 2026, we have reviewed our financial targets and now have established new targets that we feel better line up with our plan going forward. The previous targets were to achieve an average annual organic sales growth of approximately 10% or a range of 7% to 13% and to achieve an EBIT margin of 15% to 20% in the medium term and a target of between 30% to 50% of profits for the year to be paid for dividends. The new targets are to organically grow sales by more than 5% and to achieve an EBITDA margin of 15% to 20% in the medium term and a cash conversion rate that over time shall amount to at least 80% to 100%. The goal is still to distribute dividends of between 30% to 50% of profits for the year whilst considering of course the company's long-term development potential. We see that our rental model is gaining ground and we have a pronounced focus on strengthening that part of the business. This brings with it 3 natural consequences. Reported sales grow more slowly than the underlying business as revenues under the rental model are accrued over the contract period instead of being taken directly at the time of sale. Hence we adjust our growth rate from 7% to 13% to above 5%. Secondly, EBIT during the growth phase is burdened by increasing depreciation. The faster we grow the contract base, the more EBIT is depressed despite the strengthening of the underlying profitability through the rental model. An EBITDA target will therefore be a better match. And last, but not least, through the cash conversion that we have added, we want to show that we have succeeded in converting earnings into cash flow. These 3 new targets together address exactly this dynamic. The growth target of above 5% reflects reported sales in a mix where a growing share is accrued. The EBITDA margin measures underlying profitability without the depreciation effect and the cash conversion of 80% to 100% confirms that the profitability is translated into cash flow. In our focus going forward we have a clear target to grow both the Air Cleaner business significantly and the Cleanroom business in the U.S. whilst protecting our strong position in the Cabin Solutions. Our rental model with our product categories, Air Cleaners and Cabin Solutions, is developing well and we intend to strengthen this further. We've been at this for the past 3 years and step-by-step air cleaners is developing in share. For a particular quarter it may not be that visible, but year-on-year it will for sure grow. In 2025, we started to report our product categories in more detail and we've been very focused on driving the gross margin on both air cleaners and cleanrooms and it's now great to see that we managed to bring both categories to a gross margin level above 60%. Within air cleaning, this step-by-step improvement is driven by both an improved service business and the increased level of renewals. Our subscription model will continue to drive air cleaner margin going forward. The cleanroom category had tailwind in the form of Curexa settlement. But as we already informed in the year-end call, we had a rescheduling of 2 cleanroom projects in Q1 of this year that we will do in 2027 instead. So we knew that Q1 would be lower. And just to note on those 2 projects, it's with a long-standing customer that have several cleanrooms with us. It's something totally outside of the actual build of our cleanroom and they have made the upfront payment of about 60% of the amount already. The market environment is still uncertain out there, but we maintain a high activity level. As seen here on this slide shows a sample of where we've been pushing our solutions to help and support new clients and grow our business in the past quarter. Notably, the higher degree of digital marketing. We've made investments during 2025 to optimize our website towards SEO and tailoring to the needs of AI and AI bots and we clearly see an uptick in lead generation for Europe and Japan where we already initiated the program. We have in Q1 started the same journey for our Cleanroom business in the U.S. and expect to deliver a new digital approach to this market by the end of Q2. The high activity level cuts across all regions from Japan in the East to the U.S. in the West. When it comes to our focus, our systematic transformation program is on track with our 3 prioritized objectives: cost control, sales efficiency and customer focus. Summing up the quarter, the key steps taken were: within cost control, you can clearly see we manage our costs, both personnel adjusted for the prioritization effects as well as external services costs are well below last year. We continue our value engineering focus within Cabin Solutions to improve our competitiveness in the Cabin Solutions markets especially in Europe. When it comes to sales efficiency, we've shifted more mandate and accountability from the central organization to our regions ensuring a clear customer focus in everything we do. The increased regional activity level shown on the previous slide is proof that this is working. We've started our journey to improve our efficiency through AI tools both internally and in customer-facing processes. When it comes to customer focus, we have in the past quarter concluded our third annual regional workshops together with the regions, identifying gaps in our offering today and identifying new areas for product exploration to continue to fuel our growth for the future and build our strategic plan for 2027 through '30. We have a number of new initiatives we will be working on for the future. And before handing over to Fredrik on the financial section, let me summarize the key takeaways from my perspective of the quarter. We continue our transformation work to increase our growth. The focus on critical application areas has been key in this. And the currency-adjusted growth of 5.7% in Cabin Solutions and 13.4% in Air Cleaners is proof of this and we do this with a maintained or increased product margin. We believe that by following this path, we will be able to grow our Air Cleaner business in the next 3 to 4 years to be a significant part of our product mix. We have aligned our financial targets with this plan and to support this plan. With that said, I hand over to Fredrik.

Thank you, Sebastian. Let's now have a look at the numbers. Our strategy is to increase our recurring revenue and they are already at a relatively stable over time rate as you can see on this chart. Here we have the quarterly sales since the beginning of 2023. Last quarter revenue was SEK 114 million, slightly ahead of last quarter and slightly behind the corresponding quarter 1 year ago. Adjusted for the negative currency effect we had in the quarter, revenue was SEK 128 million, a currency-adjusted increase of 11%. The negative currency effect in the quarter was SEK 15 million and that was a result from a stronger Swedish krona in relation to all our other currencies; but the main effect comes from the Japanese yen, the U.S. dollar and the euro. For the Japanese yen only, the negative currency effect is close to SEK 11 million. And the yen is almost down 25% in value against the Swedish krona since the start of 2023. Here we see the quarterly split between recurring revenue, revenue from sales of agreements to finance companies and revenue from product sales. We have a stable rental revenue with high margins from units we hold on our balance sheet. The revenue split is primarily affected by the decline for recurring revenues because of the cancellations from the German stores that started in 2024. Now there are very few of these contracts left on our books. The decline for recurring revenue is of course also affected by the negative currency effect for mainly the Japanese yen over these years. I would like to highlight that our base for renewals have come back to more normal levels in Japan. These renewals typically follow a 3-year cyclical pattern. So to understand how this affects a pattern, you must go back 3 years and look at the sales to finance companies at that time. We continue with our quarterly numbers and here we see that our recurring revenue model supports a strong gross margin. Gross profit and gross margin are stable over time at a high level. Gross margin is close to 70% for most of the quarters since start of 2023. The stable gross margins are also supporting our EBITDA performance. We have a new set of financial targets that Sebastian mentioned before and as you can see, the trend for the EBITDA and EBIT margins follow the same pattern. On this slide, we now see the rolling 12-month numbers. Recurring revenues are driving gross margin. You can see that revenue is stable. The relative share of recurring revenues are stable. We have a stable gross profit. The gross margin is stable and at a high level. For the last 2 years, they have been in the range from 66% to 76%. And also on a rolling 12-month basis, you can see that the stable gross margins support the EBITDA margin. We are now back on a level of more than 15% after a couple of years with lower margin. Our strategy is to increase recurring revenue and increase the number of units that we have on our own books. On this slide, you can see that since second half of 2024, we steadily increased EBITDA, operating cash flow and our cash conversion rate. Now we have an EBITDA that is generating cash. The operating cash flow for the quarter is minus SEK 5 million compared to a positive SEK 2.3 million in the corresponding quarter last year. The difference mainly consists of the adjustment of noncash items related to the Curexa settlement where we recognized revenue that was released from a previous provision where the cash was paid during 2024. Another factor is the underlying result in the American operations as 2 planned installations of cleanrooms have been postponed to first part of next year. Both inventory and accounts receivable have been reduced compared to same quarter last year. We have a stable financial situation. Net interest-bearing debt continued to be on a lower level and we amortized around SEK 40 million per year on our term loan. Equity to total assets ratio continued to improve, now we are at 38.5%. And with that, I hand it back over to you, Sebastian.

Thank you, Fredrik. And to close off the session in front of the Q&A, what we do at QleanAir is important. We dedicate our work to improve the health of people, the quality of products and the performance of processes and we do so throughout our 3 product categories: Cabin Solutions, Air Cleaners and Cleanrooms. Looking at the amount of clean air that is delivered through our solutions, we estimate that QleanAir solutions out there cleaned over 23.2 billion cubic meters of indoor air in Q1 and it matters. As air pollution is a key challenge for human health, people die prematurely from exposure to polluted air and we spend an important part of our lives in indoor environments and indoor air can often be more polluted than outdoor air. So with that, I hand over to the Q&A.

[Operator Instructions] The next question comes from Anders Roslund from Pareto Securities.

Yes. I have a question regarding the change of business strategy to go from sales of rental contracts to pure rental business. How quickly will this transformation be implemented? And yes, we start there.

So when it comes to the different ways that we sell our products so we basically have 3, right? Either we sell the product like just normally a product sell or we sell what we call RPG rental product where we sell a rental contract and we have the products on our books or the third way is that we sell a contract to a finance company. So the changes we are making is that when it comes to the third version so selling to finance companies, we are limiting that to Japan. So we are only selling rental purchase contracts to finance companies in Japan going forward. Otherwise when it comes to the rental purchase contracts overall, it is the biggest part already in the European market. Most of the product sale is really within the Cleanroom business. In the Cleanroom business, we don't foresee to change that because a cleanroom is more of a fixed installation and not something that you easily remove and move to another client, which is typical for the rental model. So in Europe, we will just strengthen and even more focus on the rental product model. Felt a bit complex answer there, but I think yes.

Yes. But I was more looking towards the Japanese business that you still rely on selling rental contracts to the finance companies. Will you try to change also the Japanese business or will that remain because in that case, it won't be that -- that won't be such a big change in your overall figures if you continue to?

So of course when you look at our past performance and following our performance over the years, the way with the finance company sales that we have in Japan, you really have to look back 3 years, like Fredrik mentioned, to understand how sort of the cyclicality, if you will, on that business is developing. How many contracts are up for renewal in a certain year? We will try to keep that a bit more steady. So not expand that side, but rather expand what we do over our own books.

Okay. So the Japanese business will not be that impacted from this strategy change if we -- it's more that you confirm a strategy you already have started to implement.

And we make a clear message that we're not intending to grow the finance company sales in Japan. I think that's an important thing to carry with.

But then going back to the underlying business here, it seems that Japan has held up relatively well. If we look sequentially, the major hit is in Europe where you had a quite strong outcome in the fourth quarter of SEK 56 million and now it's SEK 48 million. So sequentially, you fell significantly in Europe while you increased in Japan and the U.S. and that I assume is more or less the Curexa settlement. I mean the SEK 11 million you mentioned there is also reported as sales. So my question is simply that it seems that your European business has lost momentum sequentially here.

Yes, I can hear you. But I think I managed to touch the mute button unfortunately on our end. Looking year-over-year, Europe is stable. In constant currency, we're about even. What's really important in Europe I think is the growth that we're seeing in air cleaners and that Germany is turning into growth after having been a quite tough market for us in the past 1 to 2 years really. So I don't see that we're losing momentum. I think we had an effect in Q4 of course of finishing the year and that had some effect. But I feel that we have a great activity level. I feel that our new products are gaining ground. And so it's not the feeling I have that Europe sequentially sort of has lost momentum, absolutely not.

But you had a very strong outcome in Europe in Air Cleaners or overall in Air Cleaners, you had almost SEK 27 million in sales in the fourth quarter for Air Cleaners and now it's down to SEK 23 million. So I haven't seen such a seasonality, usually I can see that in other businesses.

I think we are becoming a bit more driven by sales. We have a totally different focus on sales and that also drives stronger finishes over the year. When you come to the finish line, we have a different type of focus in the company of reaching that target, if you will.

So you will be little bit more seasonality in your figures then. Could that be an explain why because the cleanest business is more industrial and that type of seasonality could be seen in manufacturing industries?

What drove the strong Q4 was really the French market, which was super strong in the fourth quarter. I don't think that we should see a change in seasonality so to say. I'm merely saying that I don't see any lack of momentum in the European business rather the opposite. So I feel very comfortable about the performance of the teams going into 2026.

Okay. How about the -- you have indicated that sales in Japan will be a little bit better in the first half of the year '26 and then fall back a little bit in the second half of the year versus the first half. How should we look upon the Japanese development here?

So you will still, when it comes to Japan, have an effect on how strong the renewal base for certain quarters is on the finance company side. And if, like Fredrik mentioned, you look back 3 years; we're talking about 2023 where we had strong renewal base in the finance company through Q1, Q2. And therefore, you can make that deduction that we have that benefit also with us in Q1, Q2 in 2026. But I think what's really important when it comes to Japan is that for the first quarter, we're also increasing our new cabin sales. So of course you have the effect of the renewal base and that cyclicality all the way back to when the new legislation came in Japan back in 2020. You have that effect, but we're also adding more and more new business also within the Cabin Solutions side. So I think Cabin Solutions, if we just look at new business versus last year, we grew in the neighborhood of 10% new business. And I think that's the most important for us is how we get new customers on board on our subscription models, how long they stay with us and that we keep churn, which we didn't mention in the call; but the churn has come down significantly from last year. And I think that just shows that we have now washed out most of the COVID effect from our performance.

That's good. Coming back to Cleanrooms, you've had an impressive order intake for a number of quarters now. But I just wonder how your delivery pace. I mean you missed out 2 orders that were postponed. And if you didn't have the Curexa settlement, the outcome would have been quite disastrous for the first quarter in Cleanrooms. So how should we see on the delivery pace now going forward into the second and the rest of the year?

So in the year-end call, I alluded to that we see the second half in the U.S. to be really strong and of course given our size of organization, it's getting quite tight for the second half. But we have a good feeling that we will be able to compensate for the 2 projects that were moved into 2027. And I agree with you there is a clear pickup in the order intake. I think it's a combination of us being more focused on a certain sector and thereby having more success. But overall, it's very positive in the U.S. on the order intake side and the pipeline.

So that means that you will have another relatively because if you -- from the SEK 18 million you delivered in sales in cleanrooms, if you exclude the SEK 11 million, you have some SEK 7 million. Will you see another weak second quarter or will you pick up something here and then the ending of the year will obviously be strong?

So we try not to make too much forward-looking statements in this. But I remain that the second half being the stronger part for the U.S. Cleanroom business. I think what we experienced in Q1, we're in the project business, these things will happen. It's the business we've chosen to be in. I think we have been quite safe from those kind of instances with projects that are being postponed, but those things will happen in this type of business. And when I look at the pipeline as we go through it with the team, I think we have a good chance of closing that gap.

So the second half of this year and then into next year will be the harvesting period here. And if we're looking at the gross margins here, you could see that the gross margins in Cabin Solutions are slightly down around 73% around last year and down to 71.8%, slightly lower gross margins in Cabin Solutions.

And this ties into the discussions on the new financial targets and so forth. When we grow and we had good growth in Japan in the Cabin Solutions, then of course we get more -- that also holds back the gross margin a little bit. If we sell part of that business to a finance company, then we get a bit higher share. So I don't see any decrease of the quality of earnings, so to say, within the cabins. We will have some shifts. I don't see that we're on a path given this is a little lower for this quarter.

Okay. But maybe this is a better level reflecting a little bit the new strategy that the higher share will come from rental income instead of selling? The Cleanroom business is a little bit lumpy here and it's difficult to interpret given that you had such a sizable compensation for the Curexa deal, but could we expect around 60% gross margins going forward or should it be in the range of 55% to 60% or what should we look at?

I think if you look back at the 2025 numbers, right, we were at this 60% level. For the particular quarter, of course the gross margin level achieved in the U.S. was all that -- in all aspects in top line and gross margin was heavily affected by the Curexa settlement. But if you look back to 2025, you see that we've done that climb of gross margin up to the 60% level.

Okay. That's excellent. So what about your new financial targets here? You are taking down the sales target from 10% to 5% or above 5% I should say and the EBIT range from 15% to 20% to EBITDA range of 15% to 20%. But now you call your targets midterm. Is it something you could revise or is midterm the same as long term?

What we have that is medium term and so that should be the same as it was in the former ones.

Okay. So the old ones were also medium-term targets.

Yes, that's correct.

So in fact the length of the targets are not changed. It's still midterm targets.

Yes, it's still medium term in both of them.

Okay. So what about that you're taking down the growth target from 10% to above 5%? What should we read into that?

So I think first of all, these targets have been with us since we did our IPO back in 2019. And I think when you look at the growth target, which is actually 7% to 13% and so 10% is sort of the midpoint in that, I think that we don't want to have a target where we drive away from the rental purchase -- the rental model, so to say, and drive more normal product sales or more finance company sales because I think the quality of earnings in the rental model is much higher. So we're simply trying to reflect and align the goals internally and externally so to say.

Okay. I was looking a little bit at Air Cleaners and Cleanroom sales target. Now you've been organically at least delivering maybe 20% here for '26 or also '27. How should we look about that now when Air Cleaners started, as I see it, a little bit on the slow side in the beginning of this year and you're also mentioning that Europe remains -- yes, you're a little bit cautious about growth in Europe, which is a strong air cleaner market.

Well, I think Europe for the first quarter over last year in constant currency grew 6.1%, right? So I think that is above that range. And if we look overall at Air Cleaners in constant currency, we grew 13.4%. So the underlying operational drive is there and it's happening. And when you look at the target on the top line, you have to consider that of course we have a large portion of our business still in the Cabin Solutions market. And we definitely -- I read your analysis on QleanAir and I think you're quite right that we need to be at a much higher rate on the air cleaner side. And I think the 13.4% that we had in underlying growth this quarter shows that we are doing the things that we need to have such growth that we in 2, 3, 4 years, air cleaners is a much more significant part of our mix.

No, because that's why I'm saying that the historic target is not impossible to reach if Air Cleaners and Cleanrooms are growing 15%, 20% while Cabin Solutions is more flattish.

So you feel the target is a bit low. Is that what you re saying?

Yes. But I think in combination with having more going towards the rental model of course, then we accrue more of the sales growth rather than taking it at the time of sell. So it's a combination of the 2.

Okay. Yes. I think the cash flow issue, how will you proceed with that for the remainder of the year?

I hand that to Fredrik.

I mean the reason behind the decline in cash flow is mainly coming from the U.S. Cleanroom business and these are more of onetime effects. One is the movement or the postponement of the 2 cleanrooms that were scheduled to be done or started in the first quarter this year. And second, we had a Curexa settlement in the first quarter. So we don't think that the rest of the year will be affected by this.

Okay. So you could say you could take the negative cash flow was taken here in the first quarter, but you got the Curexa physical payments in the first quarter?

No. The physical payment was made in 2024 already. So we took the revenue recognition this quarter, but the cash didn't come this quarter.

Or at least the lion part of the cash came in 2024. There was an additional piece in the settlement, but that was more limited.

Okay. So that's why you couldn't offset the weak sales in U.S. Cleanrooms business. You had to take that on the cash flow side. You built up all the equipment. So that will be ready for delivery then next year.

Yes.

Okay. So I think that was all the questions for me this time.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

So there are no written questions. So if there are no other or further questions, I would like to reiterate. Our approach to operational and strategic development is very systematic. We have a clear focus to grow our Air Cleaner business to become a significant part of our revenue base in the next 3 to 4 years. We stand out in the market with a very attractive rental model and we have aligned our financial targets with our focus on strengthening this part of the business. We have a targeted go-to-market approach. And for quarter 1, we delivered an underlying growth in constant currency of 10.7% and at a margin above 14%. Thank you for your participation and interest in QleanAir and we wish you a great continuation of the day. Thank you.

Thank you.