Attendo (Stockholm:ATT) Q1 2026 Earnings Call

0:00 Thank you, and good morning, everyone. Today, we present Attendo's results for the first quarter. As usual, we will focus on the key drivers behind our performance, our operational progress and how we continue to execute on our strategy. I will start by giving a general update on the development in the quarter, then our CFO Mikael Malngrin will take you through the financials in more detail. Next slide please. So let me start with the key highlights from the quarter. We continue to see positive development in both Finland and Scandinavia, driven by higher occupancy, stable quality indicators and improved operational efficiency. While reported net sales decreased slightly, underlying growth in continuing operations remained at around 5%.

0:46 The delta is fully explained by ended outsourcing and home care contracts in Sweden, as well as currency effects. Profitability improved significantly, with lease adjusted EBITDA increasing by around 40% to SEK $326,000,000. The comparison quarter last year was affected by the transition to the 0.6 staffing requirements in Finland that came into effect January first last year, and this means that this quarter's results in our Finnish operations reflects a normalized run rate, based on current staffing ratios. In Scandinavia, we continued to improve earnings according to plan. Adjusted earnings per share continued to increase and we delivered a strong free cash flow of SEK211 million, supporting continued investments in new capacity.

1:34 During the quarter, we opened two new disabled care units with 12 new places. Overall, this is a quarter where we clearly see the effects of the actions taken during the past year, coming through both margins and cash flow. By continuing to develop quality of care and adding new care capacity to society, we're part of the solution to solve the care challenges of both today as well as tomorrow. Next slide please. Turning to occupancy. Occupancy is a key driver for profitability and we continue to see improving occupancy across both Finland and Scandinavia. At the end of the quarter, we reached 88%, up two percentage points year on year. The improvement is driven by stronger inflow of residents, active capacity management and a continued focus on matching supply with demand in each local market.

2:27 Next slide please. So, let's turn to development of our rolling twelve month lease adjusted EBITDA We see a continued uplift in margins in both business areas, both sequentially and year on year, with lease adjusted group EBITDA reaching above 7% in the quarter. While we've seen a steadily improving margin trajectory in Finland for many consecutive quarters, I am pleased to show that we continue to deliver on the expected margin uplift in Scandinavia in Q1. As we have previously stated, we expect Scandinavia to continue to improve during 2026. The improvement is driven by several factors: higher occupancy, improved operational efficiency, a gradual exit of contracts with unsustainable terms and better cost control across the organization.

3:19 At the same time, underlying demand remains strong and we continue to steer our business mix towards an increased focus on own operations, where we have a stronger control over both non financial and financial results. With that, I hand over to our CFO Mikael Mann Gjen. Please go ahead Mikael and you put the next slide please. Thank you, Martin, and good morning, everyone. In the quarter, we saw underlying growth in both business areas, approximately 4% in Finland and 7% in Sweden. However, growth was offset by ending contracts in Sweden, and FX headwind, which resulted in reported net sales decreasing 1.6% to 4,700,000,000. In Scandinavia, the growth was down 1% reported.

4:07 However, underlying growth in continuing operations, which excludes ended and exiting contracts, was 7% with good development in own homes. Ending and exiting contracts will continue to weigh on sales throughout 2026. In Finland, reported net sales was down 1.9%. Adjusting for currency, the business grew 34% when we exclude the divested child welfare business. Improvement largely driven by an increase in net new customers compared to same quarter last year, with a good development in own nursing homes. Currency had, as expected, a larger negative net sales effect. And based on current Euro sec trading, we expect, although slightly less, still a negative FX effect also in the coming quarter.

4:55 Next slide please. The reported result improved to $470,000,000. Correspondingly, the LIS adjusted EBITDA increased from $234,000,000 to $326,000,000, up 39% versus same period last year. LIS adjusted EBITDA in Scandinavia was 24,000,000 higher and in Finland the LIS adjusted EBITDA improved 77,000,000 excluding FX effects. Currency had a 16,000,000 reported and a 12,000,000 negative effect on LIS adjusted EBITDA. Next slide, please. Growth for Attendo Finland was 4% excluding divestments and FX effects and 1.9% reported due to mainly a weaker euro.

5:42 This adjusted EBITDA was two fifty four million, an improvement of 65,000,000 or 77,000,000 excluding currency effects. The quarter improved by more sold beds in primarily owned nursing homes, continued improved manning, driven by investments in staff development, working conditions and support systems, as well as reduced sick leave. In addition, last year Q1 was as previously mentioned impacted by the transition to 0.6 staffing density requirements. The transition is now estimated to have impacted 2025 results negatively by close to SEK25 million. And please note that during 2026 we plan to exit a few low or no occupancy units, which should lead to further improved productivity.

6:29 At the same time, we're now scaling up our investments, with confirmed plans to add about 400 additional beds during 2026. And in line with our sustainable growth strategy to add two to 3% EBITDA growth per year, we acquired one smaller bolt on in Q1 and two more in April, including separately press released Alternateja. Next slide, please. In Scandinavia underlying net sales growth was 7%, driven by growth in owned homes and recent acquisition. However, net sales growth was slightly negative due to the ended and exiting contracts, and which I will come back to on the following page. In line with our communicated financial plan and the building block of margin uplift, the list adjusted EBITDA improved to 93,000,000, up 24,000,000 versus last year, improvement primarily driven by own homes and improved central costs, with ended outsourcing contracts having no material impact on the result.

7:31 The result was slightly negative, affected by home care exits, where the contracts generated about 5,000,000 in losses. Going forward, we still foresee some minor negative impact from ongoing home care contract exits as they roll out. During the quarter, we opened two new Disabled Care Units with 12 places and also won three quality tenders in disabled care to a value of 20,000,000 on an annualized basis. Currently we have two eighty six beds under construction and we will open one new 60 beds nursing home end of the year. Next slide please. So, to better showcase underlying growth in Scandinavia, we introduced in Q4 a more detailed reporting of continuing operations versus ended and ending contracts.

8:23 As you may recall, we show the total reported net sales in EBITDA at the bottom of the page, from left to right, while at the top column of the page we see the Attendo underlying business, which we call our continuing operations and where the ended and ending contracts have been excluded. Attendo margins continued to improve for the second consecutive quarter due to improved ways of working, faster responding to changes in manning and sales, while at the same time exiting non strategic outsourcing contracts and exiting non sustainable home care contracts. As you can see, Attendo continuing operations showed a net sales growth of 7% and a margin of 5% in the quarter, up 1.5% compared to same quarter last year. At the same time, the contracts which have ended or will end had a significant impact on net sales, but limited impact on EBITDA.

9:16 Next slide, please. In total, we now have a pipeline of thirteen fifty beds and up 100 versus previous quarter. We chose the nine thirty new beds expected to open during 2026 and 2027. Worth reiterating is that our pipeline is built on our strategy to open in micro locations, where we forecast a strong need for our services, a good payer relationship with a biomechanism in place, a growing population, as well as good commute options for both staff and relatives. Next slide, please. Our free cash flow to firm showed strong resilience and improved to SEK211 million compared to SEK50 million same period last year.

10:03 As a result, the rolling twelve month free cash flow to firm increased to SEK1340 million. During the quarter, we repurchased SEK201 million worth of shares, and today we can report that we also reached our target mandate from last report to buy back 200,000,000 worth of shares between February and the time of this report. Since the initiation of our continued share buyback program back in February 2024, we have repurchased approximately 5% per annum of outstanding shares. And in line with our EPS strategy, our ambition is to continue our share buyback program, and if the AGM later today approves a new mandate, we aim to disclose a new program shortly.

10:49 Next slide, please. So let's have a look at some of our key financial metrics. If we start at the top left, the adjusted earnings per share improved by SEK34, up 39% versus last year. Improvement primarily due to high list adjusted EBITDA and further supported by continued share buybacks. If we turn to the top figure on the right and our Adjusted Margin % adjusted for non recurring items in '24, we continue to improve our List Adjusted EBITDA margin. In Q1, the rolling twelve month margin was 7.2%, up 1.5% compared to the quarter last year. And if we look at the figure at the bottom left, our LIS adjusted net debt to EBITDA ratio remained at 1.1 and down 0.7 times compared to the same quarter last year.

11:43 And finally, if we look at the figure on the bottom right, net interest expenses in the quarter was 24,000,000, 7,000,000 better than the same period last year and 38,000,000 lower on a rolling twelve month basis, further supporting our adjusted earnings per share growth. With that, I hand over to you, Martin. Thank you, Mikael. So, let me summarize. We continue to deliver appreciated care, creating value for both individuals and for society. Our latest surveys show high and stable satisfaction across all stakeholder groups, which confirms the resilience and sustainability of our operating model. The high and stable quality across our operations is paired with solid financial performance, driven by continued improvement in occupancy and strong operational efficiency.

12:32 We also continue to strengthen our geographical footprint by gradually leaving less attractive areas and opening new units in locations with stronger long term demand and better economics. With one new bolt on acquisition made during Q1 and another two signed early Q2, we continue to deliver in line with our strategy for balanced growth, targeting at least two percent annual EBITDA growth through acquisitions. For the first quarter, rolling twelve month lease adjusted earnings per share increased to 6.47 kroner, well in line with our financial plan and rolled towards our new financial target of reaching at least 9 kroner per share in 2028. Our strong financial results and cash flow enable increased investments in new capacity to to meet the growing demand for care in society.

13:21 Currently, we have around nine thirty new care beds under construction. Overall, Attendo is well positioned to meet increasing care needs in society while delivering sustainable and profitable growth for shareholders. With that, I'd like to thank you for your attention and open up for Q and A. Operator, please go ahead. The next question comes from Julia Angelistrand from Handelsbanken. Please go ahead. Hi, and thank you for taking my question. I have three, and I take them one by one. And firstly, on the Scandinavia margin trajectory.

14:13 I know you don't provide specific margin guidance, but it seems like Scandinavia is showing a nice turnaround with margins up 1.3 percentage points. So could you elaborate how much of your initiatives that have already materialized and whether you expect impact to come through gradually or be more back end loaded, looking at the underlying operations? Thank you, Julia. As I said, we don't cut the margin. But as we have previously stated, we expect a gradual improvement of margins in Scandinavia throughout 2026. So I think this is just the first proof point of that. And just to add as well, you may be aware, last year we also had some one off effects impacting the reported results in Home Care in both Q2 and Q3.

15:12 Okay, that's clear. And then secondly, a question on Finland. Demands appears to be quite strong. So could you give an indication of how much of the planned openings you expect to fill during 2026? And if you think that this strong level of demand is sustainable? If you look at the underlying demand growth due to demographics, it's strong in all our markets, but it starts a bit earlier in Finland than in Sweden, capacity growth already from now onwards.

16:01 Will start opening at a higher pace starting Q2, meaning from next quarter on in Finland, and we expect to fill new capacity up to mature level within about twelve months time period from opening. Okay. Understood. And then just a follow-up question there. Do you when do you expect the demand in Sweden to increase? To be in line with what we see in Finland, I mean. Yeah, I mean, Finland, we've already seen it. I mean, we expect Sweden demand growth to start picking up from now and onwards. In Finland, it's actually started already a few years ago.

16:48 So we expect the mangroves to start picking up basically from now on in Sweden. And we are planning to start opening in from Q4. Opened the next one in Sweden and then opening at the higher pace from twenty twenty seven Q1 and onwards. Okay. And just my last question then. Can you elaborate a little bit on the rationale behind the latest acquisition, which is a bit outside your core Elderly Care business? Is this a segment you want to grow within? And also wondering, just considering you divested a disability care unit last year to a competitor.

17:43 Just maybe a few words there. Sure. I think this is very much in line with our strategy for Finland. We about 75% of our business in Finland is elderly care. That's correct. The remaining part is divided between disabled care and social psychiatry, including substance abuse, which is a fairly big segment in Finland. So this is complementary to our already existing substance abuse operations in Finland. Auchinika is a very well known brand in Finland. I think it will strengthen our total offering within that segment. So we're really happy about that acquisition. With regards to the small divestment that we did earlier in Finland, which was child welfare, that is a very small segment for us.

18:36 That was a bit subscale, so that's also part of us reducing complexity and streamlining our offering. Okay, thank you for that. The next question comes from Philip Eckengrain from AB (publ) go ahead. Good morning, guys. So Finnish margins improved considerably. Just trying to understand a bit moving forward here, but how much of the easier staffing comp or you went into the year with sort of a different cost base before the change of staffing requirements. So how much of the improvement in margins is the easier staffing comp washing through versus structural improvements that should persist into Q2 and onwards?

19:27 So good morning, and thank you for the question. We estimate now that the impact from the staffing transition impacted negatively Q1 last year by approximately SEK 25,000,000. So that would correspond to slightly north of one percentage point. Got it. Thank you, Mikael. That's helpful. And then just on occupancy in Finland perhaps, it's up 87%, if I'm not mistaken. And what's the practical ceiling here? And what's the and I guess this is sort of hard to quantify and you don't want to give you items on it, but what's the margin sensitivity for each percentage point of occupancy from here?

20:15 If we were to see one percentage point more occupancy, what would that imply on margins? Thank you for that. That's a great question. I believe as we state in our EBITA growth, sustainable growth model, one percentage point in occupancy development generally translates into an additional two percentage EBITA growth on productivity. Got it. And then just on the leverage, it's at 1.1. How do you see sort of the trade up between potential new M and A, any sort of any plans on the pipeline? Could you give us any color on that versus accelerated capacity additions or buybacks and sort of the mix and how you think about that moving forward throughout the coming year?

21:10 I think we have stated in our growth model, we plan to grow with a combination of organic openings and bolt on acquisitions. If we look at our cash flow, it's strong enough to support a combination of both dividend, continued share buybacks, organic growth and M and A. And I think as you noted, leverage is quite low on 1.1%, given our target range of 1.5 to 2.5. But on the other hand, I mean, gives us awesome maneuverability. Now when we are increasing growth pace, we're increasing organic growth. So I think we're in a good position to continue to grow the company forward.

22:03 Roger, thank you very much. That was all for me. Thank you. The next question comes from Bjorn Olsen from SEB. First, just a follow-up then on the occupancy in Finland. The trend seems to be slightly decreasing. And as you're guiding for a higher pipeline of new openings, do you think that will sort of slightly compress the occupancy improvement for the quarters to come, maybe Q2, Q3? Yes, I think that's a good question. And of course, when we're opening at a higher pace, yes, that will very likely hold back overall occupancy development somewhat, if you look at the average overall occupancy, the Zone International.

22:57 When we look at our growth model, model for balanced growth, we separate EBITDA growth from new openings and adding capacity from occupancy development in existing portfolio. So we still estimate that we still target occupancy improvement in existing portfolio towards our target of reaching 92% on average, while of course new openings, it will take we expect it to take at least twelve months from opening to fill up new capacity forward. Makes sense. And do you think is it credible to think that the new openings have a steeper path towards 92%, because I guess you open where the demand is?

23:55 Well, what we can say is that the ones that we have opened over the past eighteen months have filled up within a year. And filled up, you mean 92% -ish? Yes. Clear. And on Scandinavia, I may be speaking only for myself, but somewhat extrapolate perhaps to the entire audience of analysts. We still missed your margin improvement by roughly 50 bps on average. And I mean that's you're guiding quite transparently on the continuing operations versus existing. So the miss from our side seem to be driven by efficiency initiatives from your side. Could you give I mean, just to follow-up on Julia's questions maybe, but could you give any guidance as if we are to expect additional impact from cost initiatives or was this it, so to speak?

24:51 I think these are fruits from long term work. Partly work on I mean in a company like this we have more than 30,000 employees working shifts, so day and night. What is really important is a combination of leadership training, which lowers staff attrition, which lowers sickling numbers, improves stability in operation. It's also a question of leadership density and get that stability in operations. And then digitalization, which is something that we continuously work with. Have several AI pilots going on and we roll them out continuously to save time for administration and improve efficiency.

25:45 All that combined makes operation more efficient and also less dependent on, for example, rental stuff, which is now at close to zero level. And that is what we're seeing the frugal. So it's it's rather a long term gradual improvement rather than step changes. Okay. So we could expect some additional cost of initiatives to run through to the P and L, I guess, then? Yeah. Yeah, we continuously work on improving our ways of working. Thanks, Harrison.

26:33 The next question comes from Christopher Lilleburg from DNB Carnegie. Please go ahead. Thank you. Have three questions. First, on the Easter effect, which I guess should impact margins negatively now in the second quarter versus the first quarter. But I guess last year in Finland, margins were pretty flat sequentially because you had that staffing transition effect in Q1. So would you be able to or would it be possible maybe to quantify the Easter effect for Finland and Scandinavia here now? It's a very detailed question, Christopher. I would be happy to come back to all of the analysts on that question specifically. But I guess it's fair to assume lower margins in both markets in the second quarter versus the first quarter. Or will this be offset by continued underlying improvements similar to what we saw last year?

27:46 I mean, generally, Q2 is a bit, I would say on the margin compressed for the Easter effect versus Q1. That is correct and last year the Easter was in the same quarter, but I don't think you can make the same comparison Finland and Sweden also because of the still ongoing improvement in underlying business in Scandinavia. Okay. Lower margin in Finland, sequentially, but maybe not in Scandinavia. Yeah. That's the direction we're looking at. Yeah.

28:31 Okay. Yeah. That's yeah. Thank you very much for that. And then this difference between underlying sales and reported sales, of course, FX is what it is. But for how long do you expect to have this type of large impact from closed units and end of outsourcing contracts? Yes, so I think we were pretty much at the peak in Q1. It will now gradually become lower over the next three to four quarters and then it will be very little after that is our expectation at the moment. When we move into 2027, would you say that you have closed most units that you want and have reached low enough level for outsourcing contracts so that we will instead see you know, growth picking up from new openings?

29:34 Yes, that's the overall plan. But we continuously, of course, evaluate our contracts. But that is the overall level And of yes, the final question, if I look at the financial net adjusted for leases, it seems to be some other factors there impacting than the net interest. Is that FX or something else? That's a great question and that's correct. FX has let's call it an accounting effect on our euro based loan.

30:20 So when the euro versus SEK goes either up or down, has a one time effect on the total financial net. Okay, thank you very much. Thank you very much. As a reminder, if you wish to ask a question, The next question comes from Philip Wetterquist from SB1 Markets. Please go ahead. Good morning, guys. I have two questions. First on Finland. You mentioned in the report that you plan to take over a number of homes currently operated in the public sector during 2026.

31:05 Are those homes already on full occupancy or do you have to feel better yourself and taking over? And what is the margin profile of those homes compared to homes in own operations? That's a great question. We plan to at least take over one home in Q2, or we have taken over one home in Q2, and we plan to take over another one in Q4 at least. They are generally operating at our target occupancy or better, and we believe we can run them in the same way we run our current operations. Okay, thank you. And then my second question, if I'm not mistaken, the contract with Linkoping municipality rolled off here in April.

32:00 How much did that impact sales in Q1? And what impact will it have in Q2? And did it have any effect on earnings as well here Q1, Q2? Yes, that's correct. The Linkoping contract rolled off now. We have previously stated it's approximately 100,000,000 safety revenue, so it has about 25,000,000 impact in net sales. We don't discuss or disclose on contract level of data. Thank you. That's helpful. Thank you very much. That was all from me. There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

33:01 Well, thank you all for listening in for very good questions and comments. And that's all for us then. If there's anything else then just please contact us directly. Thank you for listening in. Thank you very much. Thank you.