Very welcome to QleanAir and to our presentation of our Q3 numbers. My name is Christina Lindstedt, and I'm the CEO of QleanAir, and I'm here together with Henrik Resmark, our CFO.
Hello.
We will go through our presentations, and then we will have a Q&A session towards the end. Very welcome. Starting with the highlights of the third quarter, we deliver a stable quarter in terms of sales and in terms of order intake. We deliver strong improvement in our EBIT level compared to the Q2 2022, an improvement of five percentage points and a level of 15.7% in EBIT. We had a strong quarter in Japan, good activity level, and good customer demand development. We had a stable development in Europe in spite of challenging macro contexts. We had a high activity level in Americas in the quarter and in the period following the quarter. Good order intake in Americas, but we don't see it in our sales figures yet in Americas.
We have a continued good profitability in our underlying business with strong gross margin of 73%. We have high recurring revenues from our business model with a large degree of long-term rental contracts, which provides stability to us in unstable times. We have had a strong focus on profitability in the quarter but also continuing to selectively focus and prioritize certain sales drive growth initiatives in the quarter. Looking at the Q3 in numbers, we delivered a sales level in the quarter of SEK 111 million, which, currency adjusted meant a slight decline of 0.6%, but overall a stable level, and with a marginal impact from currency fluctuations.
We continue to deliver a strong and high level of recurring revenues, SEK 67 million in the quarter, which represented 60% of our revenues in the quarter, and the EBIT level of 15.7% as a result of tight cost control and selected focused growth initiatives. The corresponding period in 2021 was unusually high, which was partly linked to a one-time income in the subsidiary in the U.S., which was related to Corona. Some examples of the order intake activity in the third quarter, we have announced in Europe, in Germany, a strategic partnership with a German space company called OHB, for whom we develop a customized clean zone solution, which we will deliver in the following quarters. We see a strong opportunity to grow this collaboration further in the future.
We announced also a very interesting strategically order for us in Sweden from the plastic industry for Cabin Solutions, which has been for quite some time a market in decline in Sweden. We see a continued strong interest in our Cabin Solutions, both in Germany and in other parts of Europe. In Japan, we saw a sharp increase in order intake of 56% compared to last year. We have a high renewal rate and continued strong interest in Cabin Solutions. In addition to that, we just recently announced two major orders for Air Cleaners for the office segment. These orders were significantly larger than any previously announced orders for Air Cleaners in Japan, so a very strong sign for the development of our Air Cleaners business in Japan.
We have announced a number of orders within the quarter in the U.S. and also, after the closure of the quarter, and larger orders for cleanrooms, for compounding industry, and also for research activities. Looking at some of the special customer cases in the quarter, I'd like to mention one of our important long-term customers in Germany, one of the world's largest automotive companies, ZF, with whom we continuously work on strong renewal contracts, and we work with very good, strong lifetime profitability of the solutions that remain on site for a very long time with our customers. In Japan, they just recently announced, big orders for air cleaners for the office environment. That's a customer context where we protect employees. We create a healthier environment in the office. We reduce the risk for spreading of virus.
We protect people from pollen problems and create a healthier and safer environment. Another important customer case in the U.S. was the fact that the most recently announced large cleanroom order was from a private compounder as a result of our strategy to increase our customer mix, and a very good, interesting case that. It's a big opportunity to develop further in the future. Looking at the geographical breakdown of our business, we serve more than 3,000 customers across the globe, and we have long-term relationships with our customers, where in the bulk of the cases, our long-term rental contracts are renewed or extended. We have satisfied customers, and we have a large degree of customers that come back to us and that also provide good opportunities for us for cross-selling.
We sell more and more of our solutions to the same customers. We have a low churn level of around 7.5%, which is another indication of a high customer satisfaction. Looking at the breakdown of our numbers geographically, Americas is still our smallest and youngest region, representing 6% of our sales, but 20% of our order intake in the quarter. What we see, of course, a strong progression here that Americas will start to contribute more on the sales side going forward. We see good results of our conscious strategy in the U.S. to develop our customer mix and start exploring new customer segments. We have a high activity level in our U.S. team, and we are confident that we will be able to deliver growth and profitable growth in the U.S. going forward.
In Europe, it was the region that was the most impacted in the quarter by the turbulent macroeconomic situation and the uncertain geopolitical situation, which in certain cases resulted in postponed customer decisions and canceled customer meetings. In spite of that, in the quarter, we had an increase in our sales of about 5%. We see an increase in our sales of Cabin Solutions as a result of a conscious strategy to really focus on scaling our successful customer segments. We also see positive results from sales resources that we had brought into our important German market earlier in the year. In Japan, we had a good quarter, and Japan is the single most important country when it comes to contribution, both on sales and on profitability.
In addition to the larger orders on the air cleaner side for offices, we also step-by-step grow our presence on the industrial air cleaner side. A very important strategic move for QleanAir in Japan. At the same time, we see good opportunity for us to continue the growth on our Cabin Solutions, and we continue to introduce more products to our product portfolio and increase our network of channel partners. Looking at the drivers behind our profitability in the third quarter, primarily, we have the strength in our business model, which provides us with a high degree and a high level and a stable level of recurring revenues. We have a low CapEx level.
In addition to the 60% of our revenues coming from long-term rental contracts in our own books, we sell long-term rental contracts to finance companies, and we also have direct sales of our solutions to our customers with low CapEx utilization. We work with external partners for production and service, and we have a high level of sales per employee of almost SEK 4 million. We focus on cost control and selective price increases and selected activities for driving growth in terms of sales-driving activities. In terms of strategic priorities and drivers for profitable growth, we will continue with our investments in sales and in sales-driving activities while focusing on cost control. We'll continue with our product innovations and upcoming product launches to strengthen our portfolios. We will continue to develop and explore our different growth opportunities in our three geographical regions.
We have a big strength in the geographical mix and the product mix that we have. We will continue to explore those different growth opportunities. With our portfolio of solutions, we solve problems, air cleaning problems that are global, and we provide solutions to these problems that are global. With that being said, I'd like to hand over to Henrik and the financials.
Thank you very much. QleanAir is delivering stable sales and also stable order intake in the third quarter, despite challenging macro situation. Europe is growing, Japan is growing, and in the U.S., the order intake is improving, and we expect a sales growth going forward. We continue to deliver high and stable gross margins, 73% in the quarter, and we improve the EBIT margin versus the second quarter this year, 15.7%. Our business model with rental contracts and recurring revenues deliver not only profitability, but also revenues in tougher market conditions. This slide illustrates the relation between the book values of units in QleanAir balance sheet and the revenues stemming from such units. The recurring revenues were stable in the quarter, and the recurring revenues are a solid base of revenues that to a larger extent are predictable in the future.
Now there are SEK 271 million on a rolling 12 months basis. The book value is relatively low, SEK 55 million compared to the recurring revenues, and this is a really important contributor to our gross margins. We continue quarter by quarter to increase our installed base. We see an increase in air cleaners in Europe, and we see an increase in cabin solutions in Japan. Also the cabin solutions in Europe is a very, very solid market to us. We are lacking primarily product sales. Once we get U.S. up to speed, we foresee an improvement in sales growth. Now some final words about the balance sheet and the cash flow. We continue to amortize quarter by quarter. We follow that plan. The net debt to equity ratio is 0.9, and the equity ratio is above 30%.
In the quarter, the cash flow is lower. That is primarily because we have two cleanroom projects in Sweden that are delayed and affects the working capital in a negative way. Back to Christina.
In addition to measuring and sharing our financial information, we also disclose on a quarterly basis how much clean air we deliver across the globe through our installed base of air cleaning units. In the quarter, compared to the same quarter last year, we increased that figure with 23%, ended up at delivering a bit more than 6 billion cubic meters at the end of the quarter. Looking ahead at our next steps, we have a strong focus on profitable growth. We see great opportunities for us to grow our business in the different parts of the globe. At the same time, we face short-term challenges in terms of impact on customer demand at this point in time in Europe linked to the uncertain times.
In the medium and longer term, we see great opportunities for growth in our different focus areas. We have the ambition to deliver growth of 10% over time on an annual basis, and an EBIT margin of 15%-20%, and to pay out a dividend of 30%-50% of our net profit. That was our presentation for the Q3. Now we are very happy to receive questions. Yes, we have a question coming in here from Oskar Vilhelmsson. Hello, Oskar.
Hello, Christina and Henrik. Oskar here from Redeye. Thank you for taking my question.
Hello.
The macro situation in Europe, could you elaborate a little bit on that, on the effects on your customers? Has it changed in any direction during the last quarter?
We see that in some ongoing customer discussions, especially for larger projects, on the Air Cleaner side. We have seen postponements of decisions. More linked to the fact that it can be bigger investments and those decisions become bigger in uncertain times. Also in some cases to some extent, customer meetings being canceled and so on. A reduction in the activity level.
Okay, fair enough. In the APAC region, what type of synergies do you reckon here from the Cabin Solutions and the industrial Air Cleaners you spoke a bit here about before?
Well, our first steps, I mean, we launched air cleaning solutions in Japan late 2020. In the first stages, also linked to the big two orders we announced the other day, that has been very much about being in the same territory in the office environment where we've been before. There we have been able to initially reach existing customers, but with a broader range of solutions. On the other hand also, we have initially reached new office customers with air cleaners and then been able to cross-sell cabin solutions there. Now we are entering with air cleaners a new territory in Japan with industrial solutions. So there it's very much about building that market and growing that opportunity.
Of course, we see opportunities for Cabin Solutions within those customers as well. Those are types of customers where we sell Cabin Solutions in especially Germany, for instance.
Okay. Thank you. Thank you, Christina. This one is maybe to Henrik. Gross margins here held up pretty well during the quarter, and you mentioned you increased prices on some product categories. Could you elaborate a little bit on the underlying products there? What is the segments that you can carry out the price increases or has it been easier or harder in some segment to do so?
I mean, we really have to do this cautiously when it comes to price increase. Of course, we are seeing higher cost for our cost of goods sold, obviously. We are also looking into price increases in certain segments, in certain product categories. We also, of course, have to take into consideration the competition that we are facing out there. Yes, definitely we try to increase the prices, but we cannot do it across the board, so to speak. We do it category by category and country by country, you can also say.
Just another one on sort of the financing. You have reduced your debt here lately. Has the sort of increased interest rates environment here affected you or your strategy in some way regarding the ownership of installations or how you will manage that part?
That hasn't changed at all actually. Of course, we are facing higher interest rates. It is what it is. I mean, with increased sales growth going forward, we try to sort of diminish that effect. Top of our agenda is definitely to keep the operating profit and the margins even though we are, as Christina mentioned, we are facing delayed decisions by the customers, and that of course affects the sales growth. We try to balance off the increased costs with sales growth, definitely.
All right. Thank you. That was my questions for now. I get back in the queue. Thank you.
Do we have some more questions from the panel? No more questions? In that case, we would very much like to thank you for your participation and for your interest, and wish you a good continuation of the day. Thank you very much.
Thank you.