My name is Andreas Göth, CEO of QleanAir, warm welcome to our results for the second quarter in 2020. As you heard, I also have our CFO, Henrik Resmark, with me today. I would like to start with the third page in our presentation, just give you a short, brief introduction to QleanAir. We are a global provider of indoor air cleaning solutions. We have very diversified and large customer base with more than 2,500 customers around the market. Our main markets today are Japan, Germany, U.S., and Sweden, but we also have establishment in 10 more European countries. We have a rental-based revenue model, which means that we are renting out a solution to our customers in the areas where we operate. We are typically signing 36-month contracts which includes installation, preventive service, and function guarantee to our customers.
We are, since December last year, listed on the Nasdaq First North Growth Market in Sweden. Just a few words about our financial targets. The growth target that we have is to continue organic growth story, and the ambition is to grow with approximately 10% on an annual basis. We want to do that in a profitable way. Our target is to have a 15%-20% EBIT margin over the years. This is our midterm target, so meaning three - five years. We also have an ambition to pay dividends to our shareholders, 30%-50% of the net profit that we generate. If we go to slide five, and give you a business update for the second quarter. We are very happy to release our second quarter today. We have seen a strong growth in the quarter and increased profitability.
The sales increased by 26%, up to SEK 137 million , and the organic growth was 24%. Very strong numbers in terms of sales growth. Our EBIT margin increased a little bit to 23.6% and amounted to SEK 32.4 million for the quarter. It came with a strong operating cash flow, which increased to just short of SEK 35 million . That's all very strong. However, we are affected by the COVID-19 pandemic, and our order intake was affected by it and decreased with 29% for the quarter. It's been a tough quarter in a way that it's been tough to go out to our customers, to meet our customers. We have had lockdowns in many markets around the world. That is, of course, affecting our short-term order intake.
However, we also believe that the pandemic will increase the general awareness about the need to have a healthy and safe indoor environment. We see that already now that the interest for high-quality air cleaning solution is increasing on a daily basis. That's, in the long term, very positive for us. If we go to our different markets or geographies, we had a very strong performance in APAC, which means Japan for us, and also the Americas, the U.S. market also saw some strong increase in sales growth in the quarter. As you can see in the graphs here on slide five, again, strong sales, but we had a tougher situation when it comes to the order intake. The margins, EBIT margins, stayed very stable. That's all very good.
If we go to slide six, go through our three product areas, which we operate with, starting with Cabin Solutions. We had a very strong quarter in Japan. We've had a long series of years of growth in Japan, and the last couple of quarters here have been exceptionally strong. We had a new law coming into effect 1st of April, which has boosted our sales in Japan for the quarter here. We also have a very positive outlook for the coming years in Japan. We will continue our growth in this market. We saw a 25% increase in total for Cabin Solutions, which also includes our European markets. The Cabin Solutions is all about protecting people from passive smoking in workplaces, in offices, in public places, but also in production sites and institutions.
If we go to slide seven, that's our second product area, Room Solutions. It's very much about our clean room installations. We build clean rooms for our customers in various segments, but mostly in hospital pharmacies, third-party compounders, but also in medtech producing companies, laboratories, et cetera. Our markets here are the U.S., and also the Sweden and Nordic markets. In terms of sales growth, we had a very strong quarter. In terms of orders, it was not so strong. We saw a lockdown in many states in the U.S., which affected our ability to do active sales work. A little bit of a mixed situation here, but again, we have a long-term positive outlook for this product area. If we go to slide eight, Facility Solutions.
Facility Solutions is all about protecting people from different kind of contaminations in industrial context or in healthcare context, or now also even in office context. We are operating here mostly today in our European markets, but we are also looking into establish this product area in other markets going forward. In the second quarter, we had some really positive product launches. We launched a food-graded version for the food and beverage industry, which we believe very much in, especially now with the push from the COVID-19 pandemic. We see the increased need here to have a safe and healthy environment for the food industry going forward. We also did some upgrades of our existing product range here, FS 70 product for the industrial environments and offices with HEPA filters, also as an effect of the increased interest in high-efficiency filtration to create a safe indoor environment.
That's all very positive, and we saw a sales growth with 10%, a little bit more than 10% in the quarter. Also here in European markets, we were affected by the COVID-19 pandemic in the meaning that it's been very tough to get out and have physical in-person meetings with our customers, and that is affecting our sales work. Go to the next slide. Talk a little bit more about the COVID-19 impact for QleanAir, and of course, we are, as many other organizations and companies, affected by this pandemic. Of course, as I said, the most obvious effect for us is the sales work. It's tougher for us to get out to meet our customers, to understand their problems, and show how we can solve their problems.
That is, of course, affecting our order intake as long as the markets are closed or semi-closed or hard to get out there. We are continuing to monitor the situation, also from a cost perspective, from a cash discipline perspective. We have, of course, launched some cost-saving projects here. We are also redirecting our R&D work towards the opportunities that we see in the market here. Also from a positive perspective, I think it's fair to say that with the business model that we operate with rental contracts and an increased amount in recurring revenue, that makes us a little bit more resilient to a crisis, as we all see now. That's all positive from a risk perspective for QleanAir.
Also, if we look at the long-term perspective and the opportunity here, we see that the virus risk in general and the COVID-19 in specific, put the focus on having a good and safe indoor environment and a good air quality, and that will affect our business in general and us also. In the short term, as I mentioned, we see already now from certain segments an increased interest in our solutions. In the healthcare, we talked about that last quarter, and also from the food industry more and more. If we go to next slide, just wanted to give you some heads up on what we do and how we try to also help our customers in the market in this very challenging time.
As I said, we have all our products, Cabin Solutions and Room Solutions are already from the start equipped with the HEPA 14 filtration. That's all in the market. Now also all other products like the Facility Solutions can be equipped with HEPA 14 filters if needed or requested by customers. What we do now here, we have, just before the summer, and we will do that again, launched a campaign, what we call Back to Work, to our customers and also other prospects in the market to help them create a more safe and healthy indoor environment. It could be in offices, in canteen areas, in conference rooms, or public areas as well. If we go to slide 11, just summarizing where we are, we are extremely happy, especially in this time about our more than 2,500 customers around our markets.
They are extremely loyal, we try to be as loyal as we can to them in these times and make sure that they get the best service from us as they possibly can. We have seen an increased recurring revenue, as I said, amounted to 47% in the quarter. That's again, very positive for us, making our P&L more resilient to short-term challenges. Again, we have a very strong quarter in Japan from Cabin Solutions. That is increasing, of course, the split between our product areas, which you can see on the pie charts on the slide. With that, I think I hand over to our CFO, Henrik Resmark, going through the financials.
Thank you, Andreas. Yes. Henrik Resmark here, CFO. Moving to page 13. As mentioned by Andreas, another strong quarter from QleanAir, sales growth of +26%. On sales growth, we have contribution from all product categories. Facility Solutions is up 10%, Room Solutions +58%, and Cabin Solutions +25%. At the same time, the order intake in the second quarter is clearly hit by the current situation with COVID-19. Page 14. Still more than 75% of our customer contracts are either renewed or extended. It is clear that QleanAir has a very satisfied customer base, and the customer base is growing with increase in installed units globally. In second quarter, the recurring revenue increased to 47% of the total revenues, up from 43%. QleanAir's recurring revenues have so far proven to be valid also in corona times. We have paying customers.
Looking at the EBITDA increased to SEK 32 million from SEK 25 million. That is an increase of +29% and an EBITDA margin of close to 24%. EBIT is increased to SEK 25 million from SEK 20 million, +28%, and a margin of 18.5%. We can move to page 15, and here I would like to highlight three items when it comes to the cash flow and the balance sheet. The equity ratio improved to 21%, up from 13%, and the net debt is reduced to SEK 223 million down from SEK 259 million. We have a clear strategy to reduce the net debt over time. The operative cash flow increased in the second quarter. We have a very cash generative business model, and there is a clear strategy to pay dividends to shareholders.
The dividend earlier this year was postponed due to COVID-19, it's really up to the board of directors now to monitor the situation together with us to see if there will be a change on that decision. Finally, page 16, to summarize the numbers, we had a growth of 26%, and the target is around 10%. We have an EBIT margin of 18.5%, and the target there is 15%-20%. I mentioned the dividend situation this year, but the payout ratio target is 30%-50% of the net profit. Over to you, Andreas.
Thank you, Henrik. Just summarizing the second quarter, where we are and where we're going at page 17. I think, again, we're very proud of the very strong second quarter. We also feel very good that our rental business model makes us more resilient to these kind of environments that we are all under right now. That's all very good. We are continuing to invest in our products, especially in the new product areas, Facility Solutions and Room Solutions. That's also very important for our long-term growth opportunities. Again, a special thanks to our customers in these times. We are again, very proud of our 2,500 customers around the globe, and they keep the relationship with us, and they've been very loyal, and they like what we do and what we offer them. A big thanks to our customers.
Again, for the long-term growth, we will continue to invest in our markets, in our products, to continue the growth strategy here in a profitable and responsible way. With that, I think we are open for questions.
Thank you. If you would like to ask a question, please press zero one on your telephone keypad. If you wish to withdraw a question, you may do so by pressing zero two to cancel. That is zero one, if you would like to ask a question. Our first question is from Anders Roslund from Pareto Securities. Please go ahead.
Yes, good morning. You report in a very impressive sales development. The order intake is significantly weaker. How should we interpret that going forward, given the fact that the order intake doesn't reflect the sales development? What is the leading indicator here?
Yes. Hello, good morning, Anders. As I said, yes, we are affected in order intake, and that's basically all our markets. We've seen lockdowns in the quarter, and that makes it more challenging for us to go out to meet our customers and have active sales work. What we also have seen now is that the market is gradually opening up, of course. We will have to look and be a bit humble here for the market conditions going forward. It's still very uncertain how the markets will act now in the fall here that we go into. In general, you can say that our order intake is affecting our sales quite short-term, because normally in Facility Solutions and Cabin Solutions, when we have an order, it's not more than four to six weeks until we have an installation and thereby can recognize the revenue.
It's a longer period of time when it comes to clean room installations. We have a longer lead time from order to installation and recognized revenue.
Yes. Could you describe a little bit the outlook for Facility Solution and Room Solutions, given that it seems that they have been more impacted by the COVID-19 than Cabin Solutions?
Yes, for sure. In terms of order intake, we were affected also in Cabin Solutions in Europe and also in Japan. In the longer term, what we see is the underlying market drivers are still there very much in all our markets. That hasn't gone away. It's even so we see, especially for Facility Solutions, that the longer-term opportunity could be even higher, as I said, because of the general awareness that we now see in the market. The whole COVID-19 pandemic is kind of educating the market in the need to have a safe and healthy indoor environment, and that is increasing the interest for active solutions. In the very short term, for us, we need to have the possibility to meet our customers and to understand their problems in person and also to match our solutions.
In the short term, yes, we are very much dependent on if markets are open or closed. In the longer term, we see increased awareness leading to more opportunities in many segments that we see already now in the healthcare a little bit, also in the food industry, and also increased interest from the office environments and workplaces in general.
You haven't given any specific outlook for Q3, but shouldn't we expect an order intake that is improved given the lockdowns, that at least there are no specific lockdowns left?
Yes. Again, we don't give any forecast about that. Of course, markets are opening up for sure, and we are also looking for new opportunities that arise in the short term. We will do, of course, as always, whatever we can to help our customers in these times. Exactly how that will land in the third quarter and the fourth quarter, it's really too early to tell. Again, it's a lot of uncertainty in the market still. We don't give any specific forecast even though, as you said, markets are more open now than it was in April and May, for sure.
Specifically, the Room Solutions, you address hospitals and pharmacists. How is that area developing in the U.S. short term now?
Yes. Same thing there. The market opportunity, the market driver is still very much there. It stays the same. There's still a high need of clean room solutions for the hospital pharmacy market in the mid to long term. These customers, the hospitals and the pharmacies, they are also, of course, redirecting their focus to treating COVID-19 patients here. That's a bit of a challenge in the short term. That has clearly affected our order intake in the second quarter here in the U.S. Again, in the long term, we are continuing to build our pipeline. We still have our customers. It's not like the customers go away or do something else. They are just refocusing on what they believe are more important topics in the short term right now.
Yes, finally coming back to the Cabin Solutions, the impressive development in Japan, how is that proceeding now after April 1st when legislation was launched?
Yes. A very good question, Anders, again, we see now for the last six - nine months, very strong growth, exceptionally strong growth. That's of course a little bit boosted by the launch of the regulation from 1st of April. Yes, it will not stay on that level of growth going forward. Still we are on the growth story here in Japan, continue to be that. We see a lot of opportunities. We still have a very low market penetration. There's a lot of opportunity for us in the long term in Japan, both in terms of cabins but also in terms of, in the longer term, our different products here. In the short term, yes, we also saw some lockdowns in Japan, in Tokyo. Also that is affecting us from order intake perspective here.
Also there, we will see how Japan is acting now, going forward.
Okay. How is the development outside Tokyo? Has you succeeded getting in other cities?
Yes, we have a sales office in Osaka with two salespersons. We also do business in other cities. However, we continue to focus on the premium office segment in Tokyo. We believe that's a very strong market for us. We have a good brand recognition now after more than 10 years in that market. We have a fantastic list of customers, and we still have a quite low penetration rate here in there. We will continue to focus on that. However, we also looking forward to build our Osaka office, going forward. We are doing installations in other cities as well, outside of Tokyo and Osaka, mainly on the eastern part of Japan. Yes.
Okay. No further plans for opening up in China or Shanghai or something like that?
No actual plans today. Of course, we always look for new opportunities, both in terms of market establishment and product development and so on. No concrete plans for that right now.
When it comes to the growth parts of your business, the Room Solutions and Facility Solutions, you mentioned our new products launched for the food and beverage industry. Could you discuss a little bit more about future plans in both those areas for product development or entering new market niches?
Yes, absolutely. We will continue to focus on the food industry. We see there are more regulations in that market, and it's all about consumer safety at the end of the day. We like a high degree of regulation, and also the demand from these kinds of customers are higher in terms of product quality, in terms of filter efficiency, et cetera, and that's what we like as a premium provider of air cleaning. We now have a very strong product to address that market, and we will continue to drill down that segment in all our European markets, I would say, with a special focus on the Nordics and Germany, Austria, Switzerland. In other segments, We have a pipeline of product development, and as I said, we are focusing product development on our new product areas, Facility Solutions.
We also see now this increased interest from the healthcare industry. Again, it's a little bit early days for us, but we will continue to look for opportunities in the healthcare industry going forward. Also the office market, we also see increased interest for our products now, so that will also be affected in our R&D work here going forward. In terms of Room Solutions, I think we have a very strong product today, a modular clean Room Solution. We are continuously developing or fine-tuning that product to make it even better for our customers, even more efficient for ourselves in terms of installation work, et cetera. That investment focus will continue for Room Solutions. Also we are looking into, of course, IoT solutions going forward, which is important for all product areas. Yes.
Also comments about the cash flow. You were a little bit afraid of that clients were going to be impacted by COVID-19, that rental income could be postponed or so on. Have you had any payment difficulties from rental clients?
Of course, we have had some few customers coming back to us with certain comments, depending on how the economy in the different countries were closed down. On a general level, we have seen no big variations in the cash flow coming in from current contracts. As I said and stated, we have paying customers also in these difficult times. No, not really. It looks very stable, I have to say.
Okay. Yes, that was the question for my part. Thank you.
At the moment, there are no further audio questions, so I will hand the word back to the speakers.
Henrik, do we have any questions from the web?
We have no questions from the web through the email. No, we don't.
Okay, good. I thank you all for attending this second quarter presentation by QleanAir. Again, we're very happy to report a very strong result for the quarter, looking forward to continue our growth journey going forward. Thank you, everybody.