Welcome to the QleanAir Q2 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions -and -answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to speakers CEO Sebastian Lindström and CFO Fredrik Sandelin. Please go ahead.
Thank you. Welcome to the QleanAir Investor Presentation for Q2 2025. I'm Sebastian Lindström, I'm the CEO of QleanAir, and joining me on today's call is Fredrik Sandelin, CFO at QleanAir since the 1st of April this year. Fredrik and I will go through the presentation and then open up for Q&As towards the end. Let's dive straight into the numbers for Q2. The newly launched products are a success, and it's clear that our focus on critical application areas for our customers is giving a mitigation in the overall tougher market conditions. We also see the result of our systematic approach to sales efficiency and cost control through increased margins in the quarter.
We delivered SEK 117.9 million in sales in the quarter, which is 2.8% growth versus last year, and currency adjusted, we grew 6.2% in the quarter, a great achievement of our sales teams in a tough market environment. The main reasons for growth were, of course, a stronger renewal base to finance companies in Japan, but also a very strong quarter in the Nordics. Our recurring revenues remain stable at SEK 68 million, amounting to about SEK 278 million on a rolling 12-month basis by the end of June. The decline in the rolling 12 months is mainly due to the cancellation of school orders that we had and we reported on in 2024.
Our gross margin was strong, thanks to a stronger base of renewals to finance companies in Japan, and that we are now getting the full benefit of COGS installation and cost improvements we made over the past 18 months in the U.S. Our EBIT margin of 9.2% was a big improvement over last year's 1.4%. Our EBIT for Q2 was SEK 10.8 million versus SEK 1.6 million last year. Cash flow has been improved. We've been able to reduce inventory levels and outstanding accounts receivables through focused targets and follow-up. Summing up the quarter, we still have work to do, and we'll keep our focus on the three objectives towards the long-term profitable growth: cost control, sales efficiency, and customer focus. Recurring revenues remain stable, and our churn is getting back into normal levels.
Our setback over the past year was mainly related to the school orders from COVID times that I previously mentioned. We have in the quarter made some adjustments to the recurring revenue definition to improve accuracy. We have a positive view of our ability to deliver, but remain cautious as it relates to the economic environment, especially in Europe. Now, let's look at the regional review. Starting off with EMEA, it is an important region for U.S., accounting for 46% of our sales in Q2. The economic environment is weak. Sales cycles are longer, especially in Germany. Our figures show that our strategy to focus on more critical application areas for our clients helps mitigate in this environment. We continue to build our team in France in Q2, adding specialist competence in targeted fields. Moving on to Japan in the middle of the slide.
Renewal base is back on track, but more importantly, we see a year-on-year increase in new cabin and air cleaner sales. To finish off the regional review, we have the U.S. The team in the U.S. has done a strong recovery from last year and the absence of the Curexa project. They have, over the last two years, worked through COGS installation costs, organization, and now, given a more stable and increased volumes, we start seeing the benefit of this hard work. Margins are up, backlog and pipeline is building, and now all the focus in the coming quarter is on delivering on projects. In Q2, we landed yet another key health system, or IDN as we call them, this time in Florida at a value of $454,000.
Every new IDN is important as we know that the value when we land a new IDN is much more than the initial project. Remember that 30% of our customer base has multiple rooms from U.S.. To help understand what solutions we provide out there in the market, I continue bringing examples of cases across our regions. Starting off with EMEA on the left-hand side, I picked a cross-sales case from Belgium this time. Hitachi Energy, a global leader in the area of electrification, started off with a request on the cabin side to improve productivity in production by offering solutions for smokers within the facilities rather than having people go out of the building for the smoking break. When they learned that we as well were experts in industrial air cleaning solutions, they immediately consulted U.S. for solutions in their production.
Their main issue was heavy dust on the manufacturing process, and we quickly came up with a solution. A customer call for one cabin in the end resulted in two cabins and five air cleaners. This is a great example of cross-sales that we want to continue at further clients across all regions. If we then move with an example in Japan, I'd like to take the example of Oil Mist. We were contacted by a company in the precision machining industry that makes parts for the automotive and electronics industry in Saitama Prefecture outside Tokyo. In their manufacturing process, they struggled with Oil Mist. With the implementation of our FS70 Oil Mist, they saw immediate improvement to workers' health and safety. The Oil Mist fog was practically gone in 30 minutes. To finish off our customer cases for the past quarter, I moved to the U.S.
on the right-hand side. I choose an example that shows that we've been able to broaden our reach in sales in the U.S. The U.S. team has built a CE platform that's a continuous education program, often something that is mandatory for professionals in different fields. We made that CE platform on cleanrooms for architects, facility managers, general contractors, and equipment planners. Over 400 professionals have taken the course since the start less than a year ago. The target is, of course, to be more well-known, but to be consulted pre-RFP in projects. In Q2, we landed the first such contract. The contract value was for $75,000. We're working with the client through the pre-study phase, and we already have several additional projects in our pilot. Anyone familiar with the project business knows that getting in early is key in driving sales in a project business.
Over to new products launch. We continue our journey of launching new solutions to the market in Q2. The FS70, targeting logistics and warehouse in Europe, and a new monitoring solution for cleanrooms, CleanGuard. FS60 complements our range for ceiling or rack mounting. The product is spot on in the current market environment when customers are looking for more affordable, lightweight solutions. It includes smart features like Wi-Fi control and scheduling capabilities to optimize energy and filter usage. CleanGuard, launched in the U.S., targets multi-room sites and allows significant efficiency gains for our customers to be able to monitor and control multiple rooms in one system. This really simplifies their monitoring and reporting and adherence to regulatory compliance. This product now allows U.S. to go back to our customer base and offer a new solution.
Around 30% of our cleanroom customers have bought multiple rooms, and over 50% of our revenues in the U.S. are selling additional rooms to existing IDNs. This is to show that we have a great cleanroom product, and customers that have begun U.S.ing our product want to expand that use to multiple sites. I've alluded to it several times. The market out there is tough, but we maintain a high activity level. As seen on this slide, it shows a sample of where we have been pushing our solutions to gain new clients and grow our business in the past quarter. The high activity level cuts across all regions, from Japan in the east to the U.S. in the west. When it comes to our focus, we stick to our three prioritized objectives: cost control, sales efficiency, and customer focus.
Starting off with cost control, I think in this quarter we clearly see the benefits across all cost categories, from COGS to cost, especially in EMEA and the U.S. We're continuing to drive value engineering projects both within cabin solutions and air cleaners. In the past quarter, we started to look at the supply chain on the cabin solution side to significantly improve our cost base for Europe. Moving over to sales efficiency, our more focused approach within air cleaners, on industrial air cleaner in particular, is showing promising results. The products introduced in the last 18 months accounted for over 30% of our new unit sales in the first half of 2025. In the past quarter, we also consolidated France, Belgium, and Netherlands into one region in Q1. In Q2, we follow on with further expansion of the team with expert resources.
Our target is clear to build France as the third pillar in Europe. When it comes to customer focus, we launched in Q2 two new exploration areas with significant future potential. Exploration means that we have identified, through our systematic workshops in the regions, serious problems and problem areas related to indoor air experienced by our existing customers. We pick a few sites that have clear challenges. We then deploy our expert exploration team that goes into depth of the problem and the understanding of the customer pains, and then start testing different solutions all the way until they've solved the problem. It's a serious, structured, and systematic approach that takes several months. Also in the quarter, we launched, really in Q1, we started launching our SEO and SEM work.
We are now through the first phase and will soon be ready to launch our new digital approach to the market. Before handing over to Fredrik and the financial section, let me summarize the key takeaways from my perspective of the quarter. We have had great success from our product launches. Our structured approach with annual workshops with sales and service teams really delivers. Product launches made in the last 18 months made up over 30% of unit sales in air cleaners during the first six months of this year. We continue our journey of really understanding customer pains and have launched two new exploration areas with significant future potential. We kept at it when it comes to sales efficiency and cost control in the tough year of 2024, and now it shows in our figures. APAC is back on track.
Renewal base is back to good levels, and new sales of both cabins and air cleaners are increasing. Europe is a tough market, but we keep a high activity level throughout the regions, and we're back to positives in the Americas. With that said, I hand over to Fredrik, please.
Thank you, Sebastian. As mentioned before, we have operations spread over the world in three major areas: EMEA, APAC, and the Americas. We have a large number of customers, and the customer base is well spread geographically. EMEA accounts for 46% of total sales, and there we have all of our three product categories. Focus today is on air cleaners and cabin solutions. APAC stands for 45% of total sales, and also there focus is on cabin solutions and air cleaners. Americas accounts for close to 10% of total sales, and there we are focused on cleanrooms.
APAC and EMEA are our largest regions, and together they stand for 91% of total sales. All in all, we have a good balance between the three regions. EMEA is facing a weaker economic environment with longer sales cycles, especially in Germany. Revenues are down 2% compared to the second quarter in 2024. At the same time, we have improved our gross margin. Regarding the financial model, we have a combination of all our three possible options: rental contracts, sales to finance companies, and product sales. APAC, on the other hand, is facing a stable demand and continued high margin. Sales are up 13%. In this quarter, we've had a slight positive currency effect from the Japanese yen compared to the negative effects during the last years. The yen is also balancing the effects of the euro and the U.S. dollar for U.S.. For the euro and the U.S.
dollar, we see a negative currency effect during this quarter. The financial model is sales of rental contracts to finance companies, and renewals to finance companies are now back to normal levels. We also see a continued strong demand for cabin solutions. The Americas is showing a reduction in sales this quarter, mainly due to a weaker U.S. dollar. Improved gross margin with lower cost level and a good order backlog. The financial model is project delivery with service and maintenance contracts. We have continued to work on partnerships, and several good dialogues are underway. If we start with having a look at sales to the left, we see that this quarter is better than both last quarter and the corresponding quarter last year. Recurring revenues are on the same level as last quarter, but lower than the same quarter last year.
The decrease is mainly attributable to the withdrawal of units at German schools that started in the beginning of last year. Profitability-wise, we see that gross profit and gross margin are stable. We are back at the same level for gross profit and gross margin as we had in the first quarter of 2024. Despite the decline in sales, EBITDA is back to previous levels in late 2023 and early 2024, mainly due to increased efficiency and lower cost. On the left-hand side, we see the split between recurring revenue, sales to finance companies, and product sales. To the right, the corresponding split for units that we hold on our balance sheet, sold through finance companies, and sold units. The installed base is stable over time, and the revenue split is primarily affected by the decline for recurring revenues because of the cancellations for German schools.
Looking at the installed base to the right, we see at the bottom the units we have on our own books. Book value is only SEK 44 million, and the generated revenues are around SEK 300 million every year. We have an asset-light business model with low CapEx. I would like to again highlight that our base for renewals has come back in Japan to more normal levels. The renewals typically follow a three-year cyclical pattern. To understand how this affects the present, you must go back three years and look at the sales to finance companies at that time. If we look at the point in Q1 2022 of SEK 27 million, it moved up to SEK 30 million in the second quarter of 2022.
See the circle to the left, which allows U.S. to renew more contracts in the second quarter of 2025 than in the first quarter the same year. See the circle to the right. Still, we do not get the full benefit as the Japanese yen has lost value towards the Swedish krona during this three-year period. The financial position is stable. Equity ratio and net debt have improved compared to last quarters. Operating cash flow is stronger, impacted by that we have managed to reduce inventory and accounts receivable. With that, I hand it back over to you, Sebastian.
Thank you, Fredrik. To close off the session in front of the Q&A, what we do at QleanAir is important. We dedicate our work to improve the health of people, the quality of products, and the performance of processes. We do so throughout our three product categories: cabin solutions, air cleaners, and cleanrooms. Looking at the amount of clean air that is delivered through our solutions, we estimate that we clean over 8.2 billion cubic meters of indoor air per month by the end of Q2. It matters as air pollution is a key challenge for human health. People die prematurely from exposure to polluted air. We spend an important part of our lives in indoor environments, and indoor air can often be more polluted than outdoor air. Before going into the Q&A, let me reiterate we're sticking to our plan.
Our approach to operational and strategic development is very systematic. We have three clear operational priorities: sales efficiency, customer focus, and cost control. We have a focused product development that has given U.S. nine successful products in the last 18 months, and we have a targeted go-to-market approach. With that, I hand over to 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 Anders Roslin from Pareto Securities. Please go ahead.
Yes, good morning. I have a couple of questions. I might start off with cabin solutions. How should we see this recovery in Japan? Is it sort of a peak now of the renewal, or will it stabilize? You also talked about new business.
I think most important, of course, we have the cyclical effect that Fredrik was alluding to, like looking at the three-year sort of pattern. With that pattern, of course, the entire 2025 is at a different level than we were at 2024. In that sense, you can say that we sort of stabilized on a new level. I think more importantly for U.S. is that we're also increasing the new sales of cabins. New sales, new customers in Japan. The work that the team has been doing, going more into small and medium business and into Horeca, is really starting to give results.
We should rather see a sort of a sequentially, we could look at some sort of increase, even if this was a better situation.
So.
Due to that, you also hadn't you?
Overall, the year of 2025 is at the real elevated level versus 2024. We had, I don't want to go into a million Japanese yen, but Q2 is particularly strong. I think when we look, we don't make forward-looking statements, but the overall year is strong as such.
Excellent. In Europe, how is the situation for cabin solutions there?
Yeah, I think when we look at the quarter, the cabin solutions was quite flat. I think that's in a positive way because you have to weigh into that that we have a pretty tough economic environment in Germany, and it's harder to renew in Germany at the moment with a much more cost focus in the larger corporations, right? I think that we're quite, when I look across the European countries, we have a few countries with growth in the cabins. I think we've been very clear that when it comes to air cleaners, we focus down on industrial air cleaning, right? On cabins, we really try to take the benefits from where we have success in the different countries within a region and move that approach to the other regions, right? I think there is still quite an opportunity.
As I said, under our cost control and so forth, we're also looking into how we can become even more competitive on the cabin side for Europe through supply chain projects.
Okay, good. Is France one of those markets where you are making some sort of better market penetration?
I think when we look at Q2, we had good growth in France of about close to 10%. I think there, even though, of course, the market in France is just like in Germany, tougher, we're striking from a smaller position, right? I think that we have good opportunities to continue to grow that market. We're also, as I said, strengthening the team with expert resources. I think overall, in this market environment, we're trying to go much more for critical application areas where the solution is more must-have than nice-to-have. That's why we're adding expertise resources in France to particular areas where we think we can have a must-have solution.
Good. If we then move to air cleaners, for me, it was an impressive outcome given that you still have these effects of German school rental contracts being lost. It means that your underlying growth of industrial air cleaners must progress quite strongly now.
Yeah.
At least if you compare to the first quarter, you had SEK 21.4 million, and now suddenly you have SEK 24.4 million. It's quite a strong sequential growth here. I assume that we don't have very much of those German air cleaners from the schools in the present sales figures, which means that, given the very tough conditions, I assume that we could probably see continued sequential growth, even if year-on-year growth is still a, yeah, but you now confront easier comparison month also in the second. How do you see upon that? This air cleaner development seems very promising.
Yeah, as I alluded to in the presentation, I think our focus, which is really over the past two years, on driving towards more critical application areas. I think it's really evident when you look at over 30% of our unit sales in the first half is on products launched in less than 18 months. I think that move is what is allowing U.S. to actually grow the industrial air cleaner. We still have some schools left, and I think I alluded to it in Q1 that it's roughly 100 units or something that are expiring towards the end of the year. As you rightfully said, we have much less of that in our mix today. The underlying growth on industrial air cleaner is probably pretty good.
Very interesting. Despite tough market conditions, you saw a decline in Japan. Was that due to that you had some high deliveries last year, or how does the air cleaner development has been very strong in Japan from the beginning, but what do you see coming forward?
When you look on the year to date, right, you have a decrease on air cleaners in Japan. As I mentioned under the Q1 report, we had some extraordinary air cleaner projects through finance companies back in Q1 2024. That sort of skews the comparison a little bit. When we come into Quarter Two, we've closed that gap significantly and were much more in line with last year. We are now getting to the point, remembering that we launched air cleaners back in 2022. We're soon coming to that point where we start renewing air cleaner projects, so to say. That's going to be a really important factor. We are increasing the new sales to new customers, both within cabins and air cleaners in Japan. We do not intend to slow that down.
The contracts there are not as long as in the cabin solutions. When you talk about, are there three-year contracts also in Japan in air cleaners?
Oh, for sure. There can be, of course, we have a mix of, you know, from one year, but I think the predominant is three-year. There are even cases of six-year contracts, right? This is something we're going to learn, of course, an air cleaner that is in a very tough industrial environment. How many times can we renew that? How do we manage to renew the service and maybe exchange the product or something? It really, in air cleaners, it's a much more particular environment, so to say.
The stronger development in Europe of air cleaners, which markets are we talking about? Is it still Germany or also other markets?
Yeah, what's been really positive in Q2 and also for the year to date is the performance of the Nordic team that has really come through.
Okay. Is it Nordic, is it mainly Sweden, or is it spread all over?
It's a little bit here and there, but of course, Sweden is the main part of our Nordic region. We have good development in Finland, in Denmark, and Sweden. It's a little bit here and there.
You talk about the Nordics and Germany. How about air cleaners in other countries? You mentioned this case in Belgium.
Yeah, so.
How do you see?
Our base in Europe is really centered around Germany and the Nordics today. We identified, I think it's about 18 months ago, we decided to really go for the U.S. and go from having had more of a market partner approach to have our own organization. Our focus when it comes to further countries is France first. If we expand into further countries, it will be more on the back of key account development.
I just missed something here. Why, man, the U.S., you don't market air cleaners there. I was still.
No, we keep the U.S. team very focused on the cleanroom product.
Yeah, exactly. Exactly. Okay, then.
It's such a different, it's a project business, so it's quite different from the business that we do within air cleaners and cabins. I think that's one of the benefits we've had in the past 18 months and we're seeing the result of is really focusing that team on what they really know best.
Very good. Finally, cleanrooms, for me at least, it was a little bit disappointing that deliveries were lower in Q2 than in Q1. What you indicate now is that the second half of this year will be better. How should we think?
Yeah, so.
Given the relatively low outcome in the second quarter.
The second quarter, as Fredrik mentioned under his part of the presentation, was negatively affected by the currency exchange rate, right? That masks a pretty good stable quarter from the U.S. in Q2. For sure, Q3 is a very big portion of our year. We're really in the midst of a high delivery period now in the U.S. I think overall, of course, it's comparing to last year in the second half, we had the absence of the Curexa project, which was supposed to be close to SEK 30 million, right? In comparison to that, we're in a much better position this year. I would say even though sales and all that, the most important is that we're starting to get the benefit of all that hard work we did actually back in the end of 2023.
We should have seen it in the second half of last year, but then we didn't have the revenue to get the leverage of it, right? Now we have the leverage in revenue and we see it through the first half and we will continue to see it through the remainder of the year.
How is the, except for this large, or this $400,000 order you got in the second quarter, how does the market outlook for cleanrooms in the U.S.?
Yeah, I.
What do you see?
We have gotten better in qualifying to the right customer cases and really sticking with the focused approach on it. I see that we are in a very good, we have a good pipeline building up. When I look ahead, I see U.S. with a very positive buildup of pipeline also for 2026, right? I have a positive view in that respect.
Okay, that sounds good. I have a few questions regarding the margin here. The gross margins fell a little bit in the second quarter versus the first quarter. I just wonder if it's some seasonal effects because the mix was quite favorable, made more cabin solutions and less cleanrooms. Yeah, I'm talking about now sequentially. I had expected a little bit better gross margins here.
How do you feel?
The gross margin is more or less on the same level this quarter as well?
Yeah, they are about on the same level, yes, 68.2% versus 68.5%. What I'm meaning is that the mix was quite favorable this time in the second quarter. You increased cabin solutions and air cleaners while you had lower sales of cleanrooms compared to the first quarter.
But.
Normally, when.
It's important to note that the comparison between air cleaners, cleanrooms, and cabins are getting more even when you come to the gross margin side now with the cleanroom side improving their gross margin. We have less of a shift effect. I think when you looked at, you know, of course, compared to last year, it's a big jump. That has a lot to do with Japan having more renewals to finance companies. The renewals.
Yeah, exactly.
Companies was quite strong also in the first quarter for Japan. I think we were at, and don't take me exactly, but at JPY 235 million or something. Yes, we moved to JPY 250 million something in Q2. The currency is different between the two quarters as well. Yes.
Okay. If I go to your different cost levels here, I see that other external costs are coming down quite significantly, both year on year and quarterly, from SEK 31 million in the first quarter to SEK 26 million in the second quarter, while staff costs are quite significantly higher. It's a sort of shift between other external costs and higher staff costs. Is that something we should.
I think.
Go forward?
Overall, we're continuing to invest in our sales capabilities, right? We're strengthening the French team. We made some strengthening of the German team. We'll continue that, and that will, of course, drive our personnel costs up. I don't know if Fredrik, if you want to comment.
Yeah, that is on the personnel cost and other external costs. I mean, the reduction is also due to the higher degree of efficiency and the cost cap that was made in last year.
Going forward, we should look more to the higher staff costs, but lower other external costs if we look at the future development.
On the other external costs, we do have some costs related to legal and so forth. That will still be in there. Of course, that's already in there now.
Yeah, that's my last question. You mentioned elevated legal costs for recovering something of the lost Curexa order. How is that progressing?
I had hoped to have, as I said in Q1, more information related to that towards the end of Q2. We have to sort of play the ball where it lies with the court and so forth. I really don't have any more information. We are continuing our journey, seeking damages for the absence of the Curexa project last year.
If we look at margins going forward, what is the crucial area here? Is it just higher sales or is it a more efficient cost development or what should we see the major drivers here for moving towards your margin target range of 15 %- 20% because you're still well below that level?
Correct. I think you have both, you know, the turnaround that the U.S. team has done over the last 18 months when it comes to the COGS, when it comes to the cost of installation, the efficiency of installation, and so forth. That's an important driver. I think we did that work. If we keep sales going in a good way, which looks really promising, we should have that benefit. The other part when it comes to margin more for the long term is continuing our journey of developing products that are more critical, targeting more critical application areas of our customers. Then it's a better price level on those products. They also help mitigate in tougher environments. I think those two things are really what should be. Overall cost, that's something that we do continuously, right? That's to have those three prioritized focus areas, right? Cost control, sales efficiency.
Every day we try to improve our cost structure.
Now, because in the first quarter you mentioned specifically that you had some elevated costs for legal costs, there are still some effects of that, but to a lesser extent, or how should we see?
No, I think, of course, we're delivering a stronger quarter in Q2, but the legal costs are, of course, in the beginning of going into litigation, you have elevated costs, right? When you prepare everything and so forth. It will go a little bit in waves.
Okay, I think that that's the question from my side.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time. I hand the conference back to the speakers for any written questions or closing comments.
We have no more written questions. If there are no further questions, I would like to reiterate. Our communicated financial targets remain delivering 7% - 13% organic growth annually and building up our EBIT margin into the range of 15% - 20% in the medium to long term. Taking our company to new levels is a journey. We have a very structured approach, a structured and systematic approach in this, and that we stick to, and we're convinced that this is the right way and that it will yield financial results and allow U.S. to meet our communicated financial objectives in the mid to long term. Thank you for your participation and interest in clean air, and we wish you a great continuation of the day. Thank you.
Thank you.