Welcome to AcadeMedia Q3 2026 conference call. For the first part of the conference call, the participants will be in listen only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers, CEO Marcus Strömberg and CFO Petter Sylvan. Please go ahead.
Good morning, everybody, and welcome to this call that we will present our interim report of the third quarter. We are in the middle of the preparation, the last time of the school year. It's really a fantastic time for us. We also now deliver a strong report with a stable development focus on the future that we could do with AcadeMedia. I will take a few starting notes, and then I will hand over to Petter to present the financial result. If we try to sum up the third quarter, as I mentioned, it's a strong and stable quarter. We have followed our strategic focus, we have delivered a lot of acquisitions. We have this target where we should be 50% out of the Swedish schools, we have really worked with this during this quarter.
Just during the quarter and also after the quarter. We have announced five different acquisitions in the international strategy and one in Sweden. If you look at the number, we continue to grow in a good way, and also the financial stability has also performed in a good way. We see good positive performance from the international operation, from the adult and from primary schools. We could continue. Of course, one key for us is the quality in the business, and one way to look at this is to look at the Swedish Schools Inspectorate's quality reviews. I must say that AcadeMedia performs very well if we compare with the total sector. We see strong activities from the Swedish Schools Inspectorate Inspection, and we think that that is very positive for the schools in Sweden.
As you see from this slide, we perform in a very good way. If we continue then and look at what have AcadeMedia done in the history. This is not really what I talk a lot about. You know, I've been working with the company for 20 years. We have been, as you all know, very good to develop brand, to create organic growth, to give trust to the parents and the children, but we are also very good company to make acquisitions. If we look back around 15 years, we have made 75 acquisitions. A lot of them in Sweden, but also a lot of acquisitions international. I must say that I want to be humble, that's a part of my person. I must say that we are maybe the best to acquire education companies in Europe.
If you look at all of these companies that we have acquired, we also have the performance to develop the quality, the growth in the different brands. AcadeMedia is a strong company when it comes to acquisitions. We also have expanded in different countries. It's not so easy as to start a business in other countries. We see a lot of Swedish and other companies try to build up markets in other countries, and we build our ability and to start with strong relations. If we look at the management team that we have in Germany and the Netherlands, we have known them for many, many years, and then we start with these platform acquisitions. Over the year, we have developed a very strong business now in four different countries. We also have focus both in Poland and in the Netherlands.
What we think is the right thing to do now when we have built up these strong management teams, then it's time to grow. It's time to make more acquisition. That is what you see now in Germany, in the Netherlands, because we have a strong presence. We have a strong platform to continue to grow from. We of course have focus on the international. That is our roadmap, but we have also made one acquisition in Sweden. This is a company that I personally know for 20 years. It has been some illness among the owners, and they wanted to find a new owner. We are very happy that AcadeMedia is the new owner of Prolympia. Very well-performing schools. They have 10 schools, more than 4,000 students. A long queue in all of their schools.
They are really good schools. They also have this profile that is missing at AcadeMedia when it comes to sports and health. We think that that is the right focus to build a group of schools with this platform, and we hope that this could be the base of this. We want to maybe change some of our schools in this profile, and we think that this will create also attractiveness. We see that it will be more challenging when it comes to demographic development in some of the cities in Sweden, and we think that these schools, they really have the right position. If you look at the long-term development when it comes to AcadeMedia, we are so proud to see that we have stable financial performance. We continue to grow.
We continue to follow our strategy when it comes to the international development, and all of our segments now have a very strong position. On the next slide, you can see the performance when it comes to the percentage of the companies that is outside Swedish schools. We have also strong pipeline when it comes to make acquisitions. Our focus here now is to enter Poland, U.K., and also to continue to grow in existing markets. Thank you very much. I will hand over to our political expert now, Petter.
Thank you, Marcus. Good morning, everyone. Let's start to talk a bit about the political situation and investigations as we have at hand right now. As we mentioned in the last earning call, the Swedish government presented a legislative proposal to extend the principle of public access to include all independent educational providers in January. The legislation is now expected to be adopted in January 2027, in the beginning of next year. Under this proposal, the public will have the right to request access to documents from our operations on essentially the same basis as for public authorities. All requested documents will be subject to confidentiality assessment, and formal decisions will be required in cases where information is not disclosed.
We are closely monitoring the legislative process, and we are preparing for implementation to meet the requirements in January 2027. At this stage, we estimate that the implementation will result in a one-off cost of approximately SEK 25 million. The ongoing implications, however, are assessed to be manageable within existing financial frameworks, and it's not expected to have any material impact on the operating margins. There is some update regarding the profit inquiry. There has been recent negotiations between the ruling parties, and it's still ongoing as far as we know. We expect the legislative proposal in June, followed by parliamentary vote before the election, with the new rules expected to enter into force in 2028. That's the update about the investigation, and we can continue to next page 10.
Then I once again would like to highlight our investor podcast, which is available wherever you get your podcast. For instance, in the latest episode, we look further into our international business together with Kristofer Hammar, who is Director of International Operations. In the pod, he developed his thoughts on our international M&A. The purpose of the podcast is to engage with Swedish investors and other stakeholders through short, focused episodes, delivering clear insights in just 10-15 minutes. This far, we have released over eight episodes. Please continue. Let's talk about the financials now. As Marcus outlined earlier, we achieved a solid growth of 6.6% year-on-year. Preschool and International segment together with Primary schools and Adult education contributed to the positive development.
Upper secondary had a softer performance where extended library staff following new legislation had a negative impact on the result. Additionally, our adjusted EBITA margin increased to 8.2% compared to last year's 7.7%. This means that we were reaching SEK 438 million in absolute terms, up from SEK 386 million. The increase in profit has translated into higher free cash flow. Now turn to page 12. In the preschool and international segment, the increase of SEK 44 million was positively impacted by increased volumes and revenue in Germany and temporary lower cost in Norwegian operations. The compulsory school segment is up SEK 10 million year-over-year. The upper secondary school segment saw a decrease in earnings of SEK 12 million, and this was primarily attributable to increased personal cost due to expanded library staff.
Following this new legislation, lower rental cost and improved capacity utilization had, on the other hand, a positive effect. Adult education continues to report strong results driven by increased volumes in higher vocational education and labor market services. Group costs increased compared to the same period last year. Non-recurring items affecting comparability amounted to SEK 3 million. There was acquisitions and integration cost of SEK 30 million, and there was a reversal of provision for contingent consideration amounted to SEK 27 million+ . Please continue. The 12-month rolling net sales continued to grow and amounted to SEK 19.8 billion. The rolling 12-month adjusted EBITA amounted to SEK 1,440 million and corresponding to margin of 7.3% within our profitability target of 7%-8%.
We continue to have a solid free cash flow. Slide 14, please. Let's look at the quarter's development within each segment. Let's go to the preschool first and international on page 16. The number of children increased by 11.3%, and our growth was primarily driven by international expansion. The international operations account for more than 30% of the group total sales. The net sales increased by 11.3% year-over-year, positively affected by acquisitions. Currency changes had a negative impact, 3.5%, and the organic growth was 10.4%. Adjusted EBITDA was SEK 169, compared to SEK 125 last year. This improvement was largely driven by increased volumes and higher school voucher funding in the German operation, as well as temporarily lower cost levels in the Norwegian operations.
We now move on to compulsory schools on next page, we note it's minus 1.4% decrease in student numbers. Adjusted for units that are to be closed, the number of students decreased by 0.7%. Corresponding figure for the country as a whole is 1.0% decline. Net sales rose by 3.4%, primarily explained by the annual school voucher revision and adjusted EBITDA grew by 11.6% year-over-year, reaching SEK 96 million. This is corresponding to an adjusted EBITDA margin of 7.9%. Please move on to page 18 and for upper secondary school segment. The number of students grew here by 0.5%.
We saw stable growth in sales, while profitability was somewhat softer year-over-year, with an adjusted EBITDA of SEK 127 million compared with last year's SEK 139 million. Adjusted EBITDA margin was 8.1%. The decrease is primarily attributable to higher costs related to the purchase of literature and the expansion of library staff, partly offset by lower rental costs and improved capacity utilization, which then had a positive effect. We continue to the adult education segment, where we continue to see a strong performance, with profitability now improving for the 11th consecutive quarter. Sales increased by 6.7% to SEK 495 million, up from SEK 465 million, mainly attributable to higher volumes in higher vocational education and labor market services.
Adjusted EBITDA came in at SEK 67 million, up 19.6% year-over-year. The adjusted EBITA margin amounted to 13.5%, up from 12% in the same period last year. Just to remind, the second half year includes more courses that are completed, resulting in lower capacity utilization. This mainly affects the fourth quarter to come. Please continue to the next page, financial position, and we look at the free cash flow and investments on page 21. The free cash flow for the last 12 months amounts to SEK 444 million. The free cash flow as a percentage of EBITDA is 74%. Maintenance CapEx as a percentage of sales continued to decline. This is a consequence of fewer new openings and expansion units.
We continue to next page, 22, the financial position. Net debt, excluding IFRS 16, increased by SEK 508 million compared to last year, with a leverage ratio excluding IFRS 16 at 0.9, still well below the financial target of less than 3. The increase in net debt to EBITDA is mainly explained by the acquisitions made during the quarter. Finally, on page 23, our financial performance against targets. Our last 12-month organic growth, including small bolt-on acquisitions, stands at 5.6%, within our financial target of 5%-7% growth. Our adjusted EBITDA margin amounts to 7.3% in our target range of 7%-8%.
Under our former profitability target of adjusted EBIT, which is typically 20 basis points lower than adjusted EBITDA, this would also have been within the target range. The leverage ratio of 0.9 remains well below the required threshold of 3, leaving further rooms for acquisitions when opportunities occur. With these words, we end the presentation, and we open up for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Philip Ekengren from ABGSC. Please go ahead.
Yes. Good morning, guys. First of all, Norwegian operations were again flagged as benefiting from, I think you're right, temporarily lower cost levels. Could you please quantify the size of this effect in Q3? Also perhaps comment a bit on when that is set to normalize. Thank you.
Yeah. There is a mix of cost that is temporarily lower. There is slightly lower pension than expected. There is significantly lower sickness leave rates, which we think is good, but we don't think that it's on a sustainable level. There are some cost on maintenance that we think will be delayed and will rather be in the fourth quarter. The margin improvement compared to last year for the whole segment is 1.4%. Roughly as we described in the last quarter, we expect that the underlying profitability increase is rather like 1%. 0.4%-0.5% is more temporary effect than facing effect and mainly attributed to Norway. Most of that effect will come negatively in the next quarter.
Perfect. Thank you, Petter. That's helpful. On German volumes, both German volumes and vouchers continue to drive the segment growth here or at least margin improvement. How should we think about the run rate margin in Germany once acquisitions are fully integrated and perhaps a year or two out?
Good. How Could you repeat the question, please?
Yeah, sorry. How should we think about the run rate margin in Germany a few years out when recent acquisitions are fully integrated? Yeah, perhaps a comment on German margins underlying.
Yeah. We have done an uplift in margin in several of the countries, and not the least in Germany. If we separate the operations in the preschool German operation and the school operation. In school, mostly of the acquisitions we make are margin positive to the segment. We also see potentially good integration improvements within one, two years for these acquisitions. For the preschools, there has been a significant part of the uplift during this year, so we think it will probably sustain the margin, but we don't expect similar uplift next year as we have had this year.
Got it. Thank you. That's all from me for now. Thank you. I'll get back into the line.
The next question comes from Jonny Jin from SEB. Please go ahead.
Yes. Good morning, Petter and Marcus. I want to start with a quick clarification of Philip's previous question on the temporary lower cost in the quarter. Is SEK 10 million fair to assume? Is that the magnitude we are talking about in the quarter?
If you do the math, well, I think, I think 0.4%-0.5% in the segment, as a more temporally positive effect, I think that would be something around SEK 10 million, yes.
Okay. Just want to clarify. Thank you. On the upper secondary school segment, that margin took a rather big leg down here on the EBITDA margin. It went down 110 basis points year-over-year. You are currently running at an 8.4% EBITDA margin rolling 12-month basis here. Is that sort of the representable level going forward ahead, or can we expect a further decline?
Seen on an LTM level, we don't expect a further decline. I think that, if we look at it year to date, we have talked about for the last, yeah, for the quarter since the beginning of the year that there will be a margin pressure due to the reforms in upper secondary. We have also said that upper secondary comes from a long history of profitability in the range between 8% and 9%, and they are at a high utilization rates and high efficiency rates, so they come from our view from relatively high level. We have had the expectations that we should be able to hopefully sustain the margin compared to last year if we look for the full year.
Realistically, I've said that perhaps it will be a couple of percentage point lower. That's what we might end for the year. We will see. For the next year to come, our best expectations is that we will sustain the margin from this level going forward. We don't have any additional known reforms or so at the time being that will put further pressure.
Good.
Is it good?
Uh, then moving to the-
If I just comment on that.
Yeah.
You know, I love upper secondary. We have really performed fantastic when it comes to upper secondary over 20 years. We are the biggest operator in Sweden. We have 25% of the students in Stockholm, Malmö, and Gothenburg, and we have handled a lot of different challenges. If you look at the coming year, I think the key driver will be vocational training because we see a higher number of students going into vocational training. If you look at what the municipality has done, they have shut down a lot of the vocational schools, but we have kept these schools. We have Praktiska, we have Drottning Blanka. We increased the number of students, and these schools are more profitable.
If you look at the coming year, I have the strong belief that we will take benefit of that we have kept our vocational brands. The portfolio that AcadeMedia have for the moment is very strong because we have vocational program. The other thing that we are doing is that we are investing in our campuses, and this is really among the best upper secondary schools that we see in Sweden. We invest now in Stockholm, we invest in Malmö, we invest in Gothenburg, and this will also take us into the future because the students want to go to these schools. Even if we always have to handle challenges, regulations, and so on, we have done this all over the years. For the moment, I think we have a strong portfolio of brands.
Understood. Moving to the adult segment here, I want to ask a question about organic growth. Organic growth saw an uptick here in the quarter, sequentially. What is driving that, would you say? How should we think about the sort of longevity of that growth level?
If you look at adult education, you have to think what is the key driver? What is driving the adult education? I would like to say that the main thing that is driving the adult education is the change in the workforce in Sweden. We have changes when it come to very people that is high educated because of AI. We have people that is unemployed. A lot of things is taking us to create growth when it comes to adult education. If you look at the applications now to university and high schools in Sweden, it's all-time high. When you have all-time high to university, you also have all-time high to vocational programs that we are running. The overall picture is that we are really performing good.
We are taking advantages of the changes that is in the labor force, and we have the right brands, and we have also developed our online platform. We are very positive when it comes to the adult education the coming years. Of course, you always have to struggle with tenders. You have to win the trust among the students, but we have a very strong position.
Okay. just one final from my end, and that's a clarification on the cost relating to the principle of public access here. I think you said SEK 25 million, if I catch you correctly. When is that expected to hit your numbers? Will you charge everything in a single quarter, or will it be a split between the coming quarters?
We expect that the absolute majority or absolute significant part of that amount will be made as investments in system, so that will be activated and will depreciate it over a couple of years or a number of years. You won't have any single quarter where it will have any substantial effect.
Okay.
Yeah.
Okay. We have a capitalization of development costs starting next quarter then, or?
Exactly. Now we have it. It hasn't started as capitalized cost. We have started that cost we extend that is very minor. Probably the capitalization will start in Q1 or so. Our Q1 of the summer.
Okay. Yeah. That's clear. That was all from me. Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Johan Lönnqvist Sundén from DNB Carnegie. Please go ahead.
Hi, Marcus and Petter. Thank you for taking my questions.
Hello.
First one from my side, it's on the earn-out revaluations that you're doing in the quarter. Can you give some color what kind of unit they are referring to? If there's any particular kind of acquisition that hasn't performed according to plan that we should be aware of?
The earn-out revaluation is related to the acquisition we made of Winford, the school company we acquired in Netherlands a couple of years ago. What is relating to, they are following their plan or slightly better than the plan from a organic perspective. Part of this earn-out was related to a significantly higher acquisition agenda, which hasn't been the focus in the business. They have been much more organic focused and focused on the margin improvement. Therefore, we constituted that they will not fulfill that stretch target, and therefore we made that revaluation.
Mm-hmm. That's clear. You've been talking a lot about the adult education throughout this call, and it seems pretty optimistic regarding both the, at least for long-term outlook for the segment. Regarding short-term visibility, how much do you know and see for the fall as of now?
We here and now, we don't see any change in demand of courses. We continue to have a good momentum, which we're hopeful to bring that with us in the beginning of fall. We will see. You probably know, when we talked about before, for in January, we were allotted a 20% increase of the programs for the autumn. We have a good foundation for a good program starts. That's what we know so far.
You should also, you should really keep in mind when you look at the adult education, that we have made a strategic shift when it comes to the different markets since 10 years ago. For the moment, our most important market is the, what we call vocational program, like university courses, but short. We think that a lot of students will move over to this sector, and we are the market leader here. As I mentioned before, if you look at application to ordinary university in Sweden, I think it's 430,000 students applying to universities. Then it always is a spillover to these shorter courses. If you look at the macro, it's very positive. The next driver is the focus on vocational program.
We see that the labor market authorities are performing better now. They invest more in vocational training. Some of our competitors has done a quite poor job. We take the tenders, and I think the focus on vocational program on adult that is from the labor market authorities will increase next year. We have a very strong position when it comes to our brand that is called Movant. Really good performing.
Excellent. You have for a few years now talked about the margin corridor in the adult business being 9%-11%, and you've been performing a bit above that for a time. Where do you think we should anticipate adult business perform next year if we don't see any big kind of swings either to the downside or upside on volumes?
I think, if we continue to have a stable growth in line with what we have had this year, we don't see any significant risks for the margin being depressed. We've seen on rolling 12 months, this is the level we are at, roughly, within these volumes as long we don't necessarily see a significant change in volume. Volumes downfall will of course have an effect on the margin.
Maybe we should just comment short also on. We really believe in this more short-term MBA or university education program. We just want to make clear that we have invested in two very interesting acquisitions. First in K2. It is not the skiing brand, it is an education brand in Norway. We have also invested in IVA. This is schools that It is like Berghs in Sweden. We are starting our cluster with these sort of schools. That is acquisitions. We have also announced that we will invest in organic growth in Warsaw and in Liverpool. We have high ambition when it comes to be more international, when it comes to the adult education also.
You can look at the company in France, like Galileo, that has worked with this for a few years. We believe that here we see potential for AcadeMedia.
Excellent. The final question from my side, it's on the Prolympia acquisition. When do you anticipate to have kind of approval from Swedish competition authorities for that acquisition to be closed?
I, it, I think in fact that we have already got it, but I don't think that, you know, we don't announce it. I look at Ludwig now. I spoke with the owners, and I think it's clear, but I don't think that we are regulated to announce it when we get this approval. I think, don't think so. It continued to work according to plan.
Yeah, because you write in report that it's still subject to approval.
Ludwig, I'm looking at you, Ludwig. But from my knowledge, we have got the approval, but maybe I should check it up, so I don't have dreamt about it at night. I'm quite convinced that we have got this approval, but maybe we should comment on that if we just check it out.
Yeah.
But it-
Yeah.
If you look at it should not be any problem because we have a very small part of this compulsory segment, so we have never been concerned that we shouldn't get this okay from the authorities.
That's clear. We can take that offline afterwards. Thanks a lot. Get back in line.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you very much for your questions. You can call us if you have any update question, and we wish you all a very good day. Thank you.