QleanAir AB (publ) (QAIR) Earnings Call Transcript & Summary

Welcome to the QleanAir Q2 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to speakers, CEO, Sebastian Lindström; and CFO, Fredrik Sandelin. Please go ahead.

So a warm welcome to the QleanAir Investor Presentation for Q2 2026. My name is Sebastian Lindström, I'm the CEO of QleanAir. And joining me in today's call is Fredrik Sandelin, CFO of QleanAir. Fredrik and I will go through the presentation and then open up for Q&A towards the end. Thank you. So starting off with the numbers for Q2. We closed a good stable quarter, but a quarter with continued significant headwind when it comes to FX, mostly related to the Japanese yen. We delivered SEK 118 million in sales in the quarter, which is just about even versus last year in reported numbers. In constant currency, we grew 6.1% versus last year. We have seen a strong performance in Air Cleaners and Cleanrooms and a stable Cabin business. Our new products focused on solutions for critical problem areas of the industry are continuing to drive growth and mitigate the uncertainty out there in the market. Our launch of the FS60 has really gained ground and in the first half now ranks among our best-selling products. Our recurring revenues were SEK 65 million, below the SEK 68 million we had last year. But again, if we take the currency effects into account, we actually grew our recurring revenues by 2%, and our churn is back to a healthy 7% to 8%. Our gross margin remains stable and healthy in the high 60s, but slightly behind last year. Our EBITDA margin of 12.9% was behind last year's 15.9%, but FX adjusted, the EBITDA margin was 13.7%. Our lower margins are due to 2 things: the FX effects and a change in relation between different revenue types. The FX effect comes from the weakening of the Japanese yen and the changes in revenue types comes from 3 things. One, that we, in Europe, no longer sell contracts to finance companies. In the short term, this transition in Europe has a negative impact on results. In the long term, however, increased product sales and rental contracts held on our own books contribute to a more profitable business. Two, that we, in Japan recorded a higher proportion of new sales relative to contract renewals to finance companies. This has had a negative impact on the earnings in the short term. However, this effect will be recouped when these contracts are renewed in the future. And three, our sales of products to customers were higher relative to rental contracts, driven by a small number of industrial customers undertaking larger investment projects where the rental model was not feasible. This has had a negative impact on margin as rental contracts, which can subsequently be renewed are more profitable. Our cash flow was SEK 18.1 million, a little below last year, but our cash conversion was in the higher range of our targets at 101%. Our EPS or earnings per share were SEK 0.23 versus SEK 0.44 (sic) [ 0.48 ] 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 last 2 years. Our systematic approach to product development is really paying off on the Air Cleaner side. The underlying currency-adjusted growth on Air Cleaners was 18% in the quarter and 16% for the first half. We have, over the past year, driven up our commercial presence in the U.S. with CE programs averaging about 100 attendees per month of architects, engineers, general constructors and so forth. In Q2, we as well launched a dedicated Cleanroom website for the U.S. and started our SEO and SEM work. All things combined, we've been able to attract more key clients and have the strongest 12-month signed contracted backlog that we've ever had in the U.S. And in the background of all these commercial activities, we hammer on with our transformation programs in supply chain and service. So let's -- we are having trouble changing -- so sorry, we have trouble changing the slide. There we go. So in our focus and plan, we have a clear target to grow both Air Cleaner business significantly and the Cleanroom business in the U.S. whilst protecting our strong position within Cabin Solutions. We've been at this for the past 4 years and step by step, as you can see on this slide, Air Cleaners and Cleanrooms are developing in share. For a particular quarter, it may not be visible but year-on-year, they will continue to grow in importance. We need some help changing slide. There we go. So why is it that we grow so well in our Air Cleaner business? Well, our strong growth in Air Cleaners is the direct result of the focus we applied back in 2024, where we doubled down on industrial Air Cleaner segment and started a series of explorations to solve critical application areas of the industry like oil mist and welding that I've spoken about before. We now have a comprehensive offering that can be deployed in many aspects of the air quality challenges of the industry, shown in the 4 pictures in the top of this slide. From the challenges with mold spores, bacteria, and powder ingredients of the food and beverage sector, challenging the safeguard of their product quality to the dust and particle causing health issues and negatively affecting process quality in warehousing and logistics; and the particles, gases, oil mist and welding fumes of the production and fabrication segment, causing health issues and negatively affecting both process and product quality, our unique range of both mobile floor-standing units and ceiling, wall or rack-mounted units allow us to deploy in a variety of environments of our customers to create a healthier workplace environment and improve process and product quality. From the left to the right of the bottom of this page, we can lower particle concentration in general through air recirculation with both floor-standing and ceiling, wall or rack-mounted units. With our mobile units, we can deploy directly at the source next to the machine or process. We can also establish clean zones to protect an operator handling a hazardous process or to protect a sensitive product or component being worked on from the environment around. We can, through the versatility of our products, create positive or negative pressure workspaces to either protect what is done in the room from the outside of the room or protect the outside from the process inside the room. This versatility of our products and the knowledge of our teams is what makes QleanAir truly unique and is something that we will secure going forward when expanding our portfolio of products and technologies. The market environment is still uncertain out there, but we maintain a very 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. The high activity level really cuts across all regions from Japan in the East to the U.S. in the West. We are now in our fourth year of the transformation plan and the results from customer focus and sales efficiency activities starts to show up as increased sales of Air Cleaners and Cleanrooms. When it comes to our focus, our systematic transformation program is on track with 3 prioritized objectives: cost control, sales efficiency and customer focus. And summing up the quarter, the key steps taken were -- and if we start off with cost control, our transition from external service partners to own service personnel in France, Benelux and selected parts of Germany is developing according to plan. We've managed to balance the increase in personnel costs with lower external services costs, even though we've had to run both setups in parallel in the transition. Our experience thus far is that we can improve our service delivery to the customer at the same or lower cost. We continue our value engineering focus within Cabin Solutions to improve our competitiveness in the Cabin Solutions market. First deliveries through this new supply chain were done in Q2 and product quality looks great. The full transition will take another 6 months, and the transition has given us some delays in installations for the past quarter on the cabin side, that we foresee it to be back on track before year-end. Moving over to sales efficiency. Our launch of FS60 has given us access to a part of the market where we can place more units per installation. This drives up the number of units per customer and thereby our sales efficiency. And we are unique in the fact that we can combine this ceiling, wall or rack-mounted solutions with floor-standing mobile units directly at the source. Also on the efficiency side, our SEO work done over the past 12 months has really paid off as leads have tripled from these source versus last year. The result is more qualified leads than from other sources, and we've only started this journey. Bringing in new customers is a priority, especially given our strong subscription model with rental contracts. Moving over to customer focus. We shifted more mandate and accountability in the past 2 years from the central organization to now -- I think the slide is a bit different than what I'm talking about.

It's lagging.

Okay. So anyway, I continue to talk about our 3 prioritized areas within our transformation program, and I've moved over to customer focus. So we -- as I said, we shifted the mandate and accountability in the past 2 years from the central organization to the regions, including marketing and service management, ensuring a clear customer focus in everything we do. Our messaging, our campaigns have, as a result, become more direct and better tailored to the specifics of each market. I'm convinced that it is this next to, of course, the successful product expansions on the Air Cleaner side that is the key driver for our strong double-digit growth in Air Cleaners and Cleanrooms. During Q2, we have built and launched a dedicated website for our Cleanroom business in the U.S. It was necessary as our global website needed to become more and more industrial to support Air Cleaner and Cabin sales in Europe and Japan. The new website allows our U.S. Cleanroom business to speak directly to the needs, regulations and buying behaviors of American health care customers rather than operating primarily as a regional section of the global QleanAir site. The key business values are stronger brand identity in the U.S., more relevant customer messaging, creating greater credibility and a better control over the U.S. customer journey. We have made investments during 2025 on our website towards SEO and tailoring to the needs of AI. And we clearly see an uptick in lead generation for Europe and Japan, where we initiated the program. We're now bringing this to the U.S. as well, and the response has been phenomenal in the U.S. Our search appearance is up. We see a clear increase in page visitors, followers and post impressions. We have also, in the past quarter, summed up the work from our regional workshops in Q1. And together with regional and product management outlined our product road map expansion plans to fuel our continued growth for the future. We have a number of very interesting new initiatives we'll be working on for the future. And in the next couple of days, we have our regions here in Solna to agree on that plan. And before handing over to Fredrik and 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. The currency adjusted growth of 16% in Air Cleaners is proof of this, and we do this with a stable 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 to support this plan. And with that said, I hand over to Fredrik and the financial section.

Thank you, Sebastian. Let's now have a look at the numbers. As mentioned by Sebastian, in our plan, we have a clear target to grow both the Air Cleaner business significantly and the Cleanroom business in the U.S. at the same time as protecting our strong position within Cabin Solutions. For Cabin Solutions this quarter, we see that sales and gross profit are lower than last year, but we managed to keep the profit margin unchanged. Air Cleaners increased sales and gross profit in line with the plan, while gross margin is negatively affected by change in the revenue mix. For Cleanrooms, we increased all 3: sales, gross profit and gross margin. Our strategy is to increase our recurring revenue. And as you can see on this chart, they are relatively stable over time. Here, we have the quarterly sales since beginning of 2023. Last quarter, revenue was SEK 118 million, ahead of last quarter and on the same level as the corresponding quarter 1 year ago. Adjusted for the negative currency effect we had in this quarter, revenue was SEK 125 million, a currency adjusted increase of 6%. The total negative currency effect in the quarter was SEK 7 million. That was primarily an effect of the weaker Japanese yen in relation to the Swedish krona. The Japanese yen is almost down with 25% against the Swedish krona since the start of 2023. For the first half year, the total negative currency effect was SEK 22 million. Here, we see the quarterly split between recurring revenue, revenue from sales of agreements to finance companies and revenue from product sales. We have stable rental revenues with high margins from units we hold on our balance sheet. The revenue split is primarily affected by the decline for recurring revenue because of the cancellations from the German schools that started in 2024. Now there are very few of these contracts left on our books, and total churn is now back to the levels we saw before these cancellations started. The decline in recurring revenue over time is, of course, also affected by the negative currency effect for mainly the Japanese yen. 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 pattern. So to understand how this affects the present, you must go back 3 years and look at the sales to finance company at that time. We continue with our quarterly numbers. Here, we see that our model with recurring revenue supports a strong gross margin. Gross profit and gross margin are stable over time at a high level. Gross margin is higher than 65% for most of the quarters since the start. Last quarter, we introduced a new financial target. EBITDA margin replaced the EBIT margin. Our EBITDA and EBIT margins move in parallel and therefore, follow the same underlying performance trend. The stable gross margins are also supporting our EBITDA performance. EBITDA in this quarter is negatively affected by the currency effect, lower renewals of contracts sold to finance companies in Japan and that we do not use sales to finance companies in Europe from the start of this year. Over time, though, this change in the revenue mix will have a positive effect on our profitability. On this slide, we now see the rolling 12 months numbers. Also here, we see that recurring revenue are driving gross margin. We can see that revenue, relative share of recurring revenue and gross profit are relatively stable. With the exception of 1 quarter since the start of 2023 on this slide, gross margin has been in the range of 66% to 76%. And also on a rolling 12-month basis, you see that the stable gross margin support the EBITDA margin. We are now back on a level of 15% after a couple of years with lower margins. As mentioned before, 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 SEK 18 million compared to SEK 23 million in the corresponding quarter last year. The operating cash flow for the first half year is SEK 13 million compared to close to SEK 26 million in the same quarter last year. The difference consists primarily of adjustments on noncash items relating to the Curexa settlement, where we recognized revenue that was released from a previous provision where the cash was paid during 2024 and a weaker underlying result in the U.S. operations as 2 planned Cleanroom installations have been postponed until next year. Taxes paid are also higher this year. Both inventory and accounts receivable have been reduced compared to the same quarter last year. We have a stable financial situation. Net interest-bearing debt continued to be on a lower level. We amortize around SEK 40 million per year on our term loan. Equity to total assets ratio continued to improve. Now we are at 38%. And with that, I hand it back over to you, Sebastian.

Thank you, Fredrik. So what we do at QleanAir is really 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 all our 3 product categories: Cabin Solutions, Air Cleaners and Cleanrooms. And looking at the amount of clean air that is delivered through our solutions, we estimate that QleanAir solutions out there cleaned over 23.8 billion cubic meters of indoor air in Q2, and it matters as air pollution is a key challenge for human health. People die prematurely from exposure to polluted air. We spend an important part of our lives in indoor environments, and indoor air can often be more polluted than outdoor air. And to close off the session before in front of the Q&A, I want to highlight the key takeaways from Q2. Our new industrial Air Cleaners are already our best-selling products for 2026. We have our strongest 12-month signed contracted backlog in the U.S. ever. And in the background, our transformation program is progressing well. So with that, I hand over to the Q&A.

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

I'll start off with a question regarding the growth outlook for Air Cleaners and Cleanrooms. I thought that you said that they are sort of the star performer here. Do you have any differences in growth outlook for Air Cleaners versus Cleanrooms?

No, I think when we look at these 2 product categories, we -- this is the kind of growth level that we're aiming for to be in -- closer to the 20% growth.

Okay. So I don't know if I heard in the wrong way, but you mentioned that you expect Air Cleaners to be a far bigger share of the business, but you don't make a big difference between those 2?

No. So both these areas that we want to grow.

Okay. Excellent. Then I would like to go back to the second quarter again. And before you said that you had more 3-year rental contracts up for renewal in the second quarter versus the other quarters in '26 in Japan, rental contracts up for renewal. And now you mentioned that it was new contracts sold to finance companies that were have larger share and that's taking down margin somewhat. How come...

So let me explain. So we -- overall, when we look at the -- which is an important factor, the renewals to finance company, the cyclicality of that over the years. It is so that the first half of this year is a strong renewal to finance company in Japan. But when we compare to last year, they've been more successful or not more than renewals to finance company, but their new sales to finance companies have increased more. So therefore -- and when we do new contracts, then we have a negative effect. So it's really just a relationship between the 2. But it still holds true what you're saying that the first half of this year is a strong renewal. We had a strong renewal base to finance companies. But in addition, we also sold a new -- a lot of new contracts to finance companies. And I think that's really the push that we've talked about in the past 2 years where we've come out with some smaller cabins, we focused more on the hotel and restaurant -- the HoReCa segment as it's called. And of course, given the low Japanese yen, that sector in Japan is growing tremendously, and we've taken benefit of that. So that has driven up our new sales quite significantly in Japan on Cabins.

Yes. That was my next question then. I expect and you have indicated that the second half of this year will be lower sales in Japan than in the first half. But now will this new sales catch up or lower renewal of rental rates...

So we do see -- we don't make forward-looking statements, right? But on this point, you can easily go back 3 years and see what our base for renewals to finance companies are on the different quarters in this year. And we will have a lower base for renewals to finance companies in Japan for the second half. And whether our traction on the new sales to finance companies will -- how well that will mitigate, that I cannot answer.

Okay. But it's at least a positive sign that you are growing the business in Japan?

Yes.

And you have no reason to -- sometimes it could be just that you have happened to have a large number of sales for those 3-year contracts. You see sort of an underlying trend of better sales in those areas as you mentioned here in Japan?

Yes. So it's really along the same lines that I've spoken to in the past 1 to 2 years, where we used to be really focused just on the premium large corporates. And then we have expanded our market reach by reaching out more to the small and medium segment. And that is really paying off. The team is doing great.

Okay. And the very strong outcome here in Air Cleaners is really impressive. And now you're in the industrial segment more than before. And normally, that means that the third quarter in industrial companies, sales are a little bit lower due to vacations, et cetera, a sign that you don't see for the rest of the business. But so will the third quarter be more seasonal? Or will this underlying sales trend be stronger?

So I agree with you that the third quarter has these effects that you're talking about. And we saw it last year where we finished the year very strong in the Air Cleaner business. So I expect that we will have a similar seasonal effect.

But the underlying growth here is something that should really be maintained?

Yes.

Excellent. And what are -- which are the strongest markets? Is it Germany still? Or is it also France and the Nordics? Or how does it look like in the Air Cleaner space?

So when you look at the Air Cleaner space, the main contributors are -- of course, Germany is our largest market on Air Cleaners, and that has been coming back after a pretty tough couple of years. France is our new focus market. They're growing in the 30%, 40% year-to-date, but from a smaller base, so to say. And -- but -- so from a size point of view, you have Germany, Sweden, Japan and then it's pretty even between a few countries. And we are -- as I've said before, we're trying with France to build another pillar on the Air Cleaner and Cabin side on the side of Germany and Japan.

So the order is what you said, Germany #1, Sweden, 2; and Japan, 3 and France, 4?

Yes.

And I guess you mentioned in the report that Japan growth was relatively flat organically. It seems then that Germany, Sweden and France has to be in a very strong growth mode?

Yes. So when you look at Air Cleaners in Japan, we still had a quite strong first half in Japan last year, where we managed to sell HEPA-related units towards more pollen and allergies and these things. So we're meeting a little bit tougher comps in Japan.

But you could say that COVID related...

But if I look in local currency, year-to-date in Japan, we're still growing in the 15% range.

Are we now yes for the first half?