Good morning, everybody, and welcome to Terveystalo's first quarter 2026 results call and webcast. My name is Kati Kaksonen. I'm responsible for investor relations and sustainability here at Terveystalo. As usual, I will go through the results with our CEO, Ville Iho, and our CFO, Juuso Pajunen. After the presentation, you'll have time for your questions. Without further ado, over to you, Ville.
Thank you, Kati, and good morning. Let's dive into it. Terveystalo first quarter. During first quarter, the market was even more negative than we expected going into the year. That was then clearly reflected into our revenue line, which came clearly down. Despite the adjustment measures that we did, especially in our operations to adjust the ops to lower demand, there was a drop through to our adjusted EBIT, which was at EUR 34 million. Quality across the operations and services are high as per standard, even improving, which is of course a positive sign of a very professional and robust organization delivering in any circumstances. If one then dives a little bit deeper in what's happening in Healthcare Services market, it is the market that is exceptionally negative this time around.
We have not seen this type of a dip since the start of COVID, and basically all of the segments, regardless of what data you look, all of the segments and services are roughly -5% to -10% down. The positive thing and silver lining with this one is that we are seeing a market bottoming out. According to our judgment, and that's reflected also in our plans and actions, the bottom has been passed and now the market shall start gradually, slowly but steadily grow from a low level. In our own operations, we have been, as we have reported earlier, we have been suffering from a lower connected employees number. That one as well, we see bottoming out.
Going forward, now the number has been stable throughout the quarter and now looking at the sales funnel activities, looking at the renewals, looking at new opportunities, looking at win rates, we can with confidence say that we start turning this one into positive going into H2. Of course, the progress will not be rapid because this is B2B business and turning agreements around will take a while. Anyways, market and our own portfolio has bottomed out and now we can start developing from this new base. The negative market environment was present in all of our three P&Ls, Healthcare Services, Portfolio business and Sweden. Little bit different reasons and different levers into that one, but bottom line was that the market conditions were very tough during quarter one 2026.
Despite that one, of course, the absolute result level and profitability we achieved was high and we can be pleased with our own ops. Now the eyes need to be fixed on growth going forward. Market will not give, even though it starts gradually improving, it will not give anything for free. We still focus and concentrate on our own agenda, which is very much geared to boost growth in all of our segments. In Healthcare Services, we'll concentrate in occupational healthcare turnaround program and transforming that one to higher value for our customers and growth. We are renewing our offering for insurance customers and companies and intensifying cooperation with the insurance companies. We are focusing in segments that are growing in our traditional integrated care. One prime example is seniors, where we have captured big market share in KELA65, and KELA65 continues developing positively for us.
Of course, on top of this one, we are seeking drastic improvements in efficiency with our digital agenda in traditional operations in Digital 10x and also in prevention. In Portfolio business, of course, a positive move from our side is dental growth. Actually, dental has been a sort of a light or positive glimpse during quarter one. The market conditions have been fairly good and the team has done very good work in improving the business. With Hohde deal, the platform will be ever stronger and on the integration of that platform Juuso will comment on the phasing and timing of that one later in the presentation. We are actively engaging with healthcare counties. It is evident that they are very low with their purchases still.
At one point, that market will activate and we want to capture our fair share and even more from that one. In Sweden, market conditions have been tough. Now the efficiency is there, and we are operationally improving. Now the focus is in commercial actions and getting the revenue line in with the higher operating leverage and improving, through that one, profitability. A cycle is a cycle, and it's clearly very, very negative at present, but we need to look beyond this cycle. As I said, market will start gradually improving, but every time a strong cycle goes through an industry, some things change permanently. And that one, coupled with the accelerating speed of technology development, will mean that we need to be even speedier in the transformation of this industry, and we need to invest in all of the three modalities in Healthcare Services delivery.
In integrated care, we are investing in Ella. We are making the life of our professionals easier, smoother, more efficient, and we are giving more time for professionals with the patients. In digital healthcare retail, we are improving the customer engagement call centers. We are investing in Digital 10x and AI-assisted appointments. Efficiency potential in this modality is huge. We are also starting to invest in prevention at scale, so digital engagement through digital and based on data, proactive engagement with our customers, being relevant when they need, actively guiding them through their lifelong health journey, and are looking for new growth in this emerging new market. We have the dry powder, we have the agenda, and we have the speed in executing in all of these three buckets. Two landmark milestones in this development during Q1.
Terveystalo launched its new novel occupational healthcare digital platform for its first clients. This one is next level compared to current platforms in the marketplace. It's developed jointly with our joint venture, MedHelp, and it's now live. It's used by the first paying customers. Early feedback from the market is very positive. We continue scaling this one rapidly throughout the year. As said, this is next level. This is future, and this will give way more value for our customers and better insights in their own personnel than before. This is a big step in our main business. In Digital 10x, we have introduced AI-assisted appointments, and we are scaling that one also during the year. The efficiency potential in this modality is huge. We are also scaling volumes so that our intelligent steering engines can steer more volumes in the digital modalities.
At the same time, we are improving traditional physician-led integrated care, and the prime tool is this Ella, which we have launched. It's the user interface for our physicians. Already now, we have gained some 30% efficiency improvement with the new platform. At the same time, we have been able to give more time to physicians and patients. As said, continue to scale this one up during the year. Within next 12 months, this is going to bypass any present platforms in the marketplace and will be a clear and powerful asset for Terveystalo. The market has been negative. It has bottomed out. We have agenda for growth. We continue investing. We continue accelerating our technology journey. With that one, over to Juuso.
Thank you, Ville. Good morning, all. I'm Juuso Pajunen, CFO of Terveystalo, and let's go to the topic, numbers. First of all, if we look at the key numbers from first quarter, it is clear to say that the relative numbers are weak. We see negative on everything else excluding the NPS of appointments, which is improving and is a stellar 88. Outside of that one, each and every number is negative, and the market has been weaker than anticipated. Let's go through then, number by number, what we are talking about. Before we go to that one, it is good to note that if we look at the absolute numbers, these are still quite robust figures. Our Q1 is materially above our average Q1 if we come to relative profitability.
If we look in absolute EBITDA terms, this is the third-best quarter ever in absolute EBITDA or EBIT, either way you want to look at it. In absolute terms, we are fairly strong, but in relative terms, we are absolutely disappointed and obviously will work on getting forward. If we then look at the group, we know that our big-ticket component is the headwinds in the revenue. We also know that the megatrends are there, and in the mid to long term, they will support growth. As stated, the market sentiment at the moment is exceptionally weak. If we then look at different segments, we will go a bit further into details. In the Healthcare Services, the big thing is occupational health. In the Portfolios, it is the public sector. Sweden, we are now evening out.
If we look on the group level and think about positives here, our efficiency is strong. No matter how you view it, in an exceptionally weak market, we have been able to adjust our operations towards the lower demand, and we will continue to do that one. All in all, with efficiency, we will get forward. If we then look at the EPS-impacting adjustment items, we have EUR 7 million of these ones. It is slightly more than I would like to see there. But if we double-click those ones, we have EUR 1 million related to the divestment of child welfare, which was a strategic move, and we have now closed that deal at the end of January. We have EUR 1 million related to the reevaluation of the values in the real estate assets.
We are doing investments in those ones, and this is something that when you reevaluate, this will take place. Finally, EUR 1 million related to restructuring. It's good to note that structural restructurings, items that impact us in the future, not the demand-facing restructurings. Finally, we have EUR 4 million in the strategic projects, which we have been communicating earlier that we have, and we have guided how much annually is coming. This is slightly front-heavy now, facing a bit more in Q1 than I was anticipating. All in all, then we end up in the reported EBIT of EUR 26.6 million. If we then go deeper into the Healthcare Services, margins are on a historically good level.
If we take any period of time and if we look at the Q1s of the history, the actual EBITDA and EBIT margins are solid, but obviously they are coming materially down. We come into the discussion of relative weakness and absolute weakness. If we look further, where this is coming, this is coming from demand. The visit growth is -9.6%, and then everything else is basically flat. The visit growth, we will double-click that one on the next slide, but basically, low morbidity impacts us through two different parts. We have fewer appointments and weaker mix as the diagnostics are lesser than in a higher upper respiratory disease situation. Obviously, the occupational healthcare has been contributing to that one.
At the same time, as said, we are continuously adjusting for the lower demand, and we have also, during April, announced statutory negotiations towards the demand situation. However, of these ones, once again, in absolute terms, we are in a good place and we will continue to invest, for example, in digital transformation, like Ville explained. Looking at the patient visits, we have the same factors we have been now going through in a couple of different quarters. We have the seasonality. We do know that we have some 43,000 fewer upper respiratory diseases than the previous year. This is part of normal variation and changes annually. This is the lowest prevalence since the COVID pandemic, if we take it on the curves.
If we look at the occupational health, it is very good to note, like Ville said, that we are now -5% in the connected employees, but it is now bottoming out or has bottomed out. The underlying impacts in there are still the same. We have the macro component, where there are less employed, and then in the dire times, employers are spending less on employee well-being. We have the actionable part, where we have the ongoing strong program to address this one. At the same time, the connected employees and the large account sales cycles are longer, so we are getting back on growth in the second half of this year. Public sector has been now bottoming out. We see that this is a minuscule bar in the chart.
Consumer is having positive momentum in the total, supported by the KELA65, and general tendencies are there. If we then take a segue with that one to the Portfolios, we already now see that in the consumer part, the dental business has been actually the best performing in relative terms of our businesses. They are basically flat, while other modalities have been clearly down. This is positive and then hopefully reflecting the future demand environment. Also, it's good to note that in the Portfolio numbers, we have the divestment of child welfare. It's visible in the bar, other in here. Outsourcing is down 50%. This one we have known, the contracts are expiring and ending. Staffing is still having negative momentum in the welfare business in the county market, but also that one is now little by little stabilizing out.
Dental, as said, positive in relative terms in the performance. We have announced the Hohde acquisition. That one is progressing well in a very good and positive dialogue with the authorities, and we are expecting the closing in the second half. Now based on the current visibility, it looks like it will be rather third quarter than fourth quarter. Obviously in these processes, there are variables that are beyond our control. As said, solid positive dialogue with the authorities, and if I would need to guess, it would be rather in Q3 closing than in Q4 closing. Going to Sweden, we are having a weak market. It is a continued weak market, and Sweden, as an export-oriented nation, is also having their share of the macro environment. At the same time, it's good to note that our efficiency is in place.
We have the EBITDA margin is now improving absolute numbers 50% up, give or take, almost 60%. Obviously, within our scale, that is peanuts in the total absolute numbers, but it's signaling that we are going to the right direction. If we then look beyond the efficiency, our next battle in here is the growth. We already now see that our connected employees are increasing. At the same time, the behavior is similar by the employers as in Finland, so their behavior is dampened by the weak macro. We have the means and the tools for growth in here, and we are confident that this will improve as we have iterated many times earlier. When talking about investments, we continue our investment cycle. We are now at EUR 56 million on the LTM.
I think that it's good to highlight from here that what we are doing is facing the real world. It is in production. It is in use. Our brightest investments, Ella, it's the user interface for professionals. It's already live. We have been rolling it out to wider user groups with improved functionalities, and we are seeing continuous growth on the usage rate. This is live. This is not something that happens at the back office and then one day comes somewhere. We are doing this one. The same applies to our joint venture, MedHelp. We have in March rolled out this to customers. We have paying customers on this one, and we are continuing this one. What we are doing is already now impacting us positively. If we then look on the balance sheet, we continue to have a positive balance sheet position.
Our net debt to EBITDA is at 2.4x. It has been increasing due to weak cash flow in Q1 and reduced profitability in Q1. If we double-click that one, we are in a good component. On the cash flow perspective, it is good to note that how our cash operates. First of all, we are a negative working capital company, which is obviously positive from balance sheet perspective. When the revenues decline, our cash flow also weakens because we don't actually release working capital, we increase it. That one is impacting us negatively. The second component on the cash flow is that if you look on the taxes paid now in Q1, we paid taxes from the record profits of 2025, and that is having a negative impact on the cash flow. All in all, our balance sheet is strong.
We can continue to invest. We are not limited by the balance sheet, but a t the same time, we are working on the cash flow. And the key component in there is going back on growth. Then before going to guidance, let's take a quick view on the market environment. First of all, if we look at the red arrows, they are all pointing down. This is weaker than we originally expected in February. We have had negative momentum through all payer groups, and then we have had incidents in the world that are also impacting, for example, the consumer confidence that Ville was showing, now referring especially to the Iranian war. The market environment in Q1 has been exceptionally weak. However, if we look at the next 12 months and we look further at the outlook, actually, the arrows are the same as we had in February.
Based on the data we have, we believe that the bottom has been seen. We do know that public sector, both Portfolio businesses and Healthcare Services, is on a lower level. They are still having stickiness in the system, but little by little, it will improve over time. If we then look the consumer market, we have the dental is already performing well. As stated in relative terms, it was the best-performing payer group and discipline. Looking forward, we have the KELA65. We have recently heard the news on the widening of the scope of KELA65 and widening the scope of the services within KELA65, which are positive. Insurance market continues to be in a positive momentum. We have Sweden, which still is having positive macro forecasts, slightly coming down compared to the February post-Iranian war, but they are still positive.
If we look at the market momentum, we believe that the market will improve. At the same time, we do know that this is tilting toward second half and the latter part of that one. If we think about the developments, Q2 will definitely be difficult. Q3 is always seasonally low, and then Q4 is the place where we would see the impacts. With these ones, we reiterate our guidance. We expect full year 2026 adjusted EBIT to be EUR 135 million-EUR 165 million. The estimates are based on the gradually improving demand environment, as explained earlier, and normalization of the upper respiratory infections in the second half. As stated, profitability in the first half is expected to be below the first half of 2025.
Further to that one, it is good to note that our scenarios at the moment are pointing rather below midpoint than above midpoint of our guidance. All in all, we have a difficult first half, but we have a strong, robust, and efficient motor, and we are investing in the future, so we are confident that we are also delivering with those investments. With these words, thank you, and let's go to Q&A.
Thanks, Juuso. We are ready now for your questions. Do we have any questions from the phone lines?
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The next question comes from Iiris Theman from DNB Carnegie. Please go ahead.
Hi. I have a couple of questions, so I'll ask them one by one. Firstly, what data indicates that the market has bottomed out? Can you explain that?
Over to you, Juuso.
Yes. Basically, it depends how you look at it from the market perspective. We obviously continuously follow up our different type of data points, consumer behavior, visits on different intervals, on days, on weeks, and those ones. At least our internal data is indicating that we have now bottomed out. You saw from Ville, basically, the connected employees perspective. Ville mentioned already in the call that it has been now stabilizing and gradually with the pipeline looking that we can capture going forward. On the external markets, we are especially referring to our own internal data.
Yeah, I think it's important to note that now we are talking about sequential improvement, so market has a fun—little bit cuts the corners. Market has reset to post-inflation new normal. Now from that base, it starts slowly but steadily grow.
Okay. Why did you keep your full year guidance, even if your scenarios are pointing below the midpoint?
Well, we have actually discussed this topic also earlier, that when we are within the range and we see that both ends of the range are something within plausible scenarios, then we don't change it. That is how we have behaved earlier, and that is how we continue to behave earlier.
Okay. Can you still go through the drivers that will contribute to reaching the midpoint of the full year guidance, which implies basically only a 4% EBIT decline?
Yeah. First of all, I iterated that we are likely to be right below midpoint than above midpoint, so then it is up to you to decide on that one. Basically, the drivers that are pushing or that are impacting our guidance, and obviously you need to put your own finger in the air, how you take them within your estimates. We have the upper respiratory diseases, we have the consumer confidence, and a general corporate behavior that we are expecting to improve from the current rock bottom. We are also confident that we have bottomed out in the connected employees and that we are getting forward with those ones in the second half. These are the key drivers if we look at our market. Of course, the public sector behavior is expected to have bottomed out at the moment.
A question Portfolio businesses. the margin decreased significantly from Q4 and Q1 last year. Is this a one-off or a level that we should expect for the coming quarters?
Well, all in all, Portfolios is also facing the negative demand environment, especially from the public sector. It is good to note that now. The outsourcing contracts have been also value contributing, and decline in those ones will not anymore deliver margin expansion, but decline in revenues is negative for us in the total perspective. We are expecting improved performance in Portfolios also now, sequential improvement, as Ville explained, for the full year.
Yeah. Question obviously is warranted. If one looks at our plan and also our internal forecast, so we are not expecting as drastic drop for upcoming quarters as you see during quarter one, as you said. We are realistically looking for a gradual improvement from lower base.
Okay. Basically, the margin decrease, is that related mainly to outsourcing business?
There are impacts. It is mainly related to the public sector, but basically the overall market environment has been weak, so that has been contributing throughout.
Okay. My final question is related to the Finnish government's budget proposal that was just released. Is there anything negative or positive that you would like to highlight regarding private healthcare service providers?
Well, if anything clearly positive, expansion of KELA65 obviously is a highly welcomed initiative from our point of view. We have been investing in this segment, so user segment seniors, we have been investing in KELA65. Are now expanding the scope of the service to do more diagnostics and also allowing higher frequency of use will most probably increase the number of users and also frequency of use. That's welcome news.
Okay. That's all. Thank you.
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Yes. Okay. Four questions. We'll take this one by one. You're calling first half to be down from last year, but how should we think about the second quarter relative to last year, given your comments regarding the market having bottomed out during the latter part of Q1?
The next question comes from Sami Sarkamies.
Thank you, Sami. We identified you based on voice already.
Some stickiness online.
Basically we don't guide per quarter. It is clear that quarter two will be also weak. What we think about is sequential improvement in total. At the moment it is not against comparables as weak as quarter one was.
Okay. On connected employees, you're expecting these to start growing sequentially in the second half of the year. Have you already won these deals? How are front book prices looking relative to your current back book prices?
Very good question. Deals are won and equally lost all the time. The real question forecasting forward is the funnel, how much renewals you have and how much new opportunities you have, and then against that one, win rates. Of course you have the packages and scopes and price levels. What we are seeing now is a clear improvement in the new opportunities funnel. New opportunities bucket increasing all the time and applying sort of average win rate to that one. We see a clear increase from that source. On the other hand, renewals from our existing customer base, that bucket is shrinking and renewal win rates are improving and really high. Just mathematically looking forward, we can sort of with confidence expect growth.
It's not going to be early on rapid and skyrocketing, but it starts to grow, and then of course we want to accelerate it over time. Looking at the scopes, when these bids enter this tender space and comparing those ones with our current Portfolio, the price levels are higher than existing ones. You need to of course do the full cycle of negotiations and go over the finish line, and only then you see what is the final package and what is the final price level on those agreements. All in all, this is forward-looking picture is positive, finally bottomed out and now looking forward and progressing due to more positive.
Okay. I may have missed, but did you give any commentary regarding cash flow in Q1? It was quite a bit below last year level. What are you expecting for the full year?
Yes. Basically what I iterated on the balance sheet slide was that, first of all, cash flow was negatively impacted by the profitability. The second component is that we paid taxes from the record year, previous year. All-time high profits lead to all-time high taxes, obviously. The third component is that our working capital is structurally negative, which means that decline in revenue impacts negatively our cash flow. These are the three components, and obviously, taxes we don't pay twice. The growth component is very important for us for the cash recovery when we are going forward.
Okay. My final question is on Hohde acquisition. Are you expecting to see any remedies from competition authorities? What was your thinking on timing for closing when you announced the deal at the year-end?
Yes. I also iterated that one on the Portfolio slide. Basically, first of all, we don't comment the ongoing process from the content perspective, so that one we don't state it here. On the closing, we have stated that the closing is expected to happen in the second half based on the dialogue so far that we have had with the authorities. We believe that it's rather in Q3 than in Q4. We have a positive, constructive dialogue continuously ongoing.
Yeah. Maybe still, even though you said we don't comment the content, I can say that against the assumptions going in, what process indicates and what is our current view on the deal perimeter, and that the final package, I would say it's rational. It's rather on slightly more positive than we thought going in.
Okay, thanks. I don't have any further questions.
There are no more questions at this time, so I hand the conference back to the speakers.
Thank you. We covered some of the questions from the webcast audience already earlier, but there are a few left. Maybe starting from the cost structure and the adjustment made. What specific actions did we take, and what actions are we still implementing going forward?
We are, of course, adjusting as a challenged company should for the lower demand and lower volumes, especially in our customer-facing activities in our operations. We have scaled down almost according to lower volume in our ops, in Healthcare Services, where the volumes were down by 11%, we were able to adjust FTEs by 10%. That's a very good and sort of a robust achievement by ops team. One needs to note and remember that at the same time, we are also investing. We are increasing resources in product, customer service, sales, account management-related activities, especially in occupational healthcare. But also in consumer and insurance-related activities. But all in all, we have been able to adjust nicely. Looking forward, of course, given the negative cycle, we are using this window as an opportunity also to look at the overhead and look at some structures.
We have a separate program related to applying AI in the back office functions, and that has started. That's not really now in the scope when we are adjusting for the lower volume. During next 12 months, you will hear more about this Project Nova also.
Thanks, Ville. Let's talk about the outsourcings in Portfolio businesses, where we have seen the revenue decrease for quite some time. What does the remaining outsourcing portfolio look like, and do we expect further planned reductions beyond 2026?
Yes. Basically, if we look the numbers in 2025, the outsourcings were delivering revenue of EUR 55 million, give or take. We have already in our guidance stated that we are expecting EUR 20 million reduction in the outsourcing portfolio revenues in 2026. Currently, we are very clearly going towards that one.
Beyond 2026, there's a slight.
Beyond 2026, that remaining roughly EUR 30 million portfolio will continue shrinking year-on-year.
Yeah. Exactly.
There we are, of course, talking about legacy outsourcing deals, and that's the focus for that sliding curve. We are, of course, interested in partnerships with the healthcare counties, and we are engaging actively. Right now, the sales funnel for larger outsourcing type of new type of deals is fairly thin. Sort of engagement is active and I would say also according to our data and interviews, some 50% of the counties are interested in increasing their purchases from private sector. As we have seen, it's very difficult to put a date on when that starts to grow.
Yeah. It should be noted that the remaining legacy contracts are on a higher end in the margin as well. Getting healthier from that perspective as well. A question on the connected employees in the occupational health. We have seen a decrease for a few quarters for now. Can we just reiterate the reasons behind the decreases and what are the sort of consequences from, for example, last year we had some negative media coverage and had that any impact on that?
Yeah. It's a very good question. It's a combination of a couple of things. When we went into our profitability improvement program in late 2023, one of the activities that we were adjusting back then was our very low price level in our main business, occupational healthcare. The market had bypassed us in pricing for quite some time. Hence, the gap was way too large to operate with adequate profitability in this business. We did the increases in two steps. In hindsight, I guess, we could have done it little bit more smoother so that maybe three steps would have been the better option. That latter price increase coupled with the negative media coverage related to billing was a negative trigger point for many companies and additional tendering. Since then, of course, it has been rectified and trust is back. We saw the damage last year.
As said, important thing is that after negative development and cycle, now it's bottomed out and forward-looking funnel looks positive.
Exactly. The last questions is related to the cooperation with the insurance companies. We have talked about intensifying our cooperation and also next generation of insurance partnerships and what's the plan there?
First of all, we are doing fine with insurance companies. Actually looking at the market view, even though the absolute volume in use of insurance coverage for healthcare spend, all in all, for all of the operators, is negative at the moment. Our market share has been improving. We are gaining in that market even though that one is in negative cycle currently. What we are doing there, of course, we are in a way putting ourselves in insurance company shoes and looking at what they are facing, what type of problems they are seeing, how they want our operations to serve the end customer, but also then what type of transparency we want and need to give them related to effectiveness of our care chain, fluency of our care chains, and cost level.
We are building that more active engagement all the time and getting positive feedback from that front. With our excellent capabilities, we can be a better partner for insurance companies, guiding and steering the customers and patients to right modality of service, right care chain, measuring the care chain effectiveness, being very precise in billing and also give transparency on that one. Also provide more transparency on full scope of the population on those contracts. There are many things that we are doing and continue to do to further improve our relationship.
Thanks. With that, we don't have any questions left. Any closing words first from you, Juuso and Ville?
No. Thank you. We will continue pushing for 2026.
Absolutely. It's a tough environment, but of course, we are tougher and now, looking forward, building on a lower base, but with a very positive view.
Thank you. On a personal note, this is my last quarter with Terveystalo. It's been a pleasure working with you guys for the last almost nine years. I have full faith in this company and the team, and I believe that Terveystalo will come through as a winner from this cycle and from this industry transformation. Thanks. Have a great rest of the day and weekend.