Earnings call transcript: Asker Healthcare’s Q1 2025 highlights 16% sales increase

Asker Healthcare Group AB (NASDAQ:ASKR) reported a robust performance for Q1 2025, with net sales climbing 16% to 364 million SEK. The company’s adjusted EBITDA saw a 17% increase, reaching 364 million SEK, while the EBITDA margin improved to 9.1%, inching closer to its long-term target of 10%. According to InvestingPro data, the stock appears to be trading near its Fair Value, with a current market capitalization of approximately 3.5 billion USD. The stock’s recent performance has been strong, with a 3.89% return in the past week, contributing to its position near its 52-week high.

Key Takeaways

• Net sales increased by 16%, driven by organic and acquired growth.
• EBITDA margin improved to 9.1%, nearing the 10% target.
• Stock price saw a modest increase of 0.3% post-earnings announcement.
• The company completed three acquisitions, enhancing its market position.
• Asker continues to lead in European healthcare distribution.

Company Performance

Asker Healthcare demonstrated strong growth in Q1 2025, with both organic and acquired growth contributing to a 16% rise in net sales. The company has shown resilience and adaptability in the competitive European healthcare market, maintaining its position as a market leader. The strategic acquisitions, including HSL in Northern Ireland, have bolstered Asker’s service offerings and expanded its footprint across 17 markets.

Financial Highlights

• Revenue: 364 million SEK, up 16% year-over-year
• Adjusted EBITDA: 364 million SEK, up 17% year-over-year
• EBITDA margin: Improved to 9.1%
• Net debt to EBITDA ratio: Reduced from 2.2 to 1.7

Outlook & Guidance

Asker Healthcare is targeting an EBITDA growth of over 15% in the coming quarters, building on the 22% adjusted EBITDA growth achieved over the last 12 months. The company remains focused on operational excellence and anticipates stable growth, supported by strategic acquisitions and distributor consolidation. InvestingPro analysis shows strong analyst consensus with a 1.8 rating (where 1 is Strong Buy), and EPS is forecast to reach 0.27 USD in FY2025. The company maintains an impressive Financial Health Score of 3.16, labeled as "GREAT" by InvestingPro’s comprehensive evaluation system.

Executive Commentary

Johan Falk, CEO of Asker Healthcare, expressed optimism about the company’s trajectory, stating, "We want to improve the healthcare system in Europe." He emphasized the company’s pricing flexibility, noting, "We are floating as a cork on the water," and highlighted the shift towards solution providers in the medtech distribution sector.

Risks and Challenges

• Market Saturation: The European medtech market is highly competitive, with 37,000 companies.
• Supply Chain Issues: Potential disruptions could impact operational efficiency.
• Macroeconomic Pressures: Economic downturns in key markets may affect growth.
• Regulatory Changes: Evolving healthcare regulations could pose compliance challenges.
• Acquisition Integration: Successfully integrating acquired companies remains crucial for sustained growth.

Q&A

During the earnings call, analysts inquired about variations in defense and project-based sales, the impact of customer database acquisitions, and pricing adjustment strategies. The management provided clarity on these issues, reinforcing the company’s strategic direction and adaptability to market trends.

Full transcript - Asker Healthcare Group AB (ASKER) Q1 2025:

Conference Moderator: Now I will hand the conference over to CEO, Johan Falk and CFO, Thomas Maas. Please go ahead.

Johan Falk, CEO, Asker: Yes. Hello, everyone. This is Johan Falk. Thank you so much for taking the time listening in to our first Q1 report. It’s exciting day for us, of course.

This is the first time after the IPO being out with the quarterly report. I’ve been here thirteen years, so I have many, many quarterly report behind me, but this is the first in the public environment. So it’s a bit exciting. I’m happy to convey that we have a good Q1 behind us. We have a solid momentum in the business.

And overall, we feel good about both the organic growth and the M and A growth. Our net sales increased with 16%. And more importantly, the organic growth, which is the kind of honest truth what the customer thinks of us is we’re going faster than the market, which is very much appreciated. We have an EBITDA that has been increasing 17%, so a bit faster than the top line, which also is good. Our EBITDA margin, most of you know that we have put a target of 10 in the mid- long term future, about 10% EBITDA margin, and we now have 9.1%.

So it’s increasing slowly but stable towards that. So that’s also a good sign. We had two new acquisitions this quarter. We had a little bit other things to focus on also. And this IPO has taken a little bit of time, as you can imagine.

But we’re happy to see two acquisition in the quarter. And as you may be followed, we did one more just the other day here. So that also feels good. I’m coming back to that in a little while. The IPO was, of course, a mega event for us as a company and also personally for the management team.

It was a successful event. We have a lot of advisers doing a good job and 20,000 new shareholders is fantastic news that people are interested in taking part of Askar and seeing the same vision as us. I mean, we want to improve the health care system in Europe, and we know we’re playing an essential part to make that happen. So for other people to think the same way and also see that this could be a good investment at the same time is the same view as we have. So we’re very grateful for that.

Our net debt over EBITDA is has been reducing from our 2.2 level to 1.7, thanks to capital injection when we IPO ed. So we have a strong balance sheet, which means that we can have a high pace of acquisition in the future as well. Our cash flow, as you know, is high and stable, but having a bit of extra firepower is very good. The opportunities out there is not endless, but it is a lot of good companies out in Europe. I mean, as you might know, this market is fantastic.

It’s 1,300,000,000,000 in turnover each year, and we have listed 800 companies in Europe. So that means that we have a lot of interesting deals. What differs the good and bad players in this market is finding the right people, finding the right entrepreneurs that are market leader in their niche. That’s what’s where we excel, I would say. So we have a good list of companies that we could acquire going forward.

So we have the cash, and we have the people out there. So that’s it feels really good. And then I mean, what we call the twin end, the organic and M and A growth is going it’s doing what it should. If we turn to Page three then and looking at our financial targets, I hope that most of the shareholders that are part of this and showing interest in Asker is looking at this over a longer period of time. As I mentioned, I’ve been here a long time, and I see this smooth, stable, soft development in the future.

I mean, I think you should look at this over time. And we have a market that is growing with 3%. We should grow faster than the market which we show. So our most important matrix is the adjusted EBITDA growth of and if you look at the last twelve months, it’s 22%, which I’m very proud to present. We have a target of over 15%.

That’s the promise to the market. And being able to do that both in the quarter of 17%, but over the last twelve months of 2022 feels really good. The R over RK or the EBITDA over net working capital is a key metric for us internally. Every new entrepreneurial company that comes into the Asgrip family is working hard to please the customer and have a good EBITDA margin, but at the same time, having an efficient working capital. So 67% and seeing a little bit increase in the quarter as well feels really good.

And I touched upon the EBITDA margin, which is slowly going upwards to 10%. If we turn to Page four, looking at the list of acquisitions. Here, you should expect us to do between ten and twenty acquisitions per year. I mean it’s both the number of acquisition, but as importantly, the total addition of EBITA. So we are you know, our list of companies that we potentially could buy is roughly 800 companies in Europe, and we have active dialogues with quite a few in the process as well.

We have an aim to have at least 10% acquired growth each year. So that’s or 10% of our EBITA each year. So it’s both the number of companies, but also the absolute amount. We’re trying to stay out of the larger acquisitions. As you can see on this list, our aim is to buy companies between SEK 100,000,000 and SEK 300,000,000 in revenue.

The last one here or the one at the top of the list, HSL in Northern Ireland, is a little bit of a platform acquisition. It’s less than 5% of our turnover, but it’s a good, solid company in Northern Ireland that could be used as an acquisition platform for the future. They already now have a list of small bolt ons that they could do. So that’s really, really, really good, and they have had a good start as well. So 12 acquisitions for the last twelve months in accounting to 1,800,000,000.0 is also where it should be.

Looking into the HSL, I mean, we’re doing quite a lot of acquisitions, and we’re not presenting everyone in detail. But this is a little bit larger, so I could take maybe one or two minutes. As you know, we are a provider of medical supplies, device and equipment. HSL is leaning a little bit more towards equipment and devices and also have a higher part of their revenue comes from services. So the value add is quite high in HSL, where we also see a higher bottom line margin on EBITDA over 10%, which is good, and it’s adding to our journey towards 10% for the group.

800,000,000 in revenue, SEK 150 FTEs, and they have a strong track record in many markets in Great Britain and Ireland. With those words, I leave

Thomas Maas, CFO, Asker: the word to Tom. Great. Thanks, Johan. I will just take a few minutes to go into some of the numbers in a little bit more detail and just step through the different regions. So here on page six, the summary very much is is is steady growth in in sales and EBITA really continuing the trends that we as a business have seen over the over the last few years.

So on the top left here, you see the net sales grew by 16%, the adjusted EBITA a 17% up to 364,000,000 SEK. And so the slightly faster growth in EBITA versus sales is is just nudging the margin upwards, which is very much in line with what we what we want to do and what we want to achieve going forwards. The r over r k, as Johan mentioned also, moving in the right direction. I’ll come back a little bit more to that, later on given the the importance of that as a steering metric in our model. The, main contributors to the growth in the quarter have really been the regions West and Central.

Again, I’ll say a little bit more about that in a second. But we do when we look across the 50 companies in the group, we do see product mix improvements coming both from from the acquisitions that we’ve done, but also the ongoing operational efforts across the across the business area. A little bit of an FX effect, should just mention, not huge during Q1, but potentially larger in the later parts of the year, but we will all obviously keep an eye on that. And so if you turn to the right hand side of this page, we just try to break out the different elements of the growth. So as Johan mentioned earlier, 6% organic growth in EBITDA through the quarter, which we’re we’re very happy with.

And then the acquired growth coming on top of that at 12%, a small negative impact from the FX effects, primarily translation effect of euro into sec, and the total growth in EBITDA adjusted EBITDA growth in the quarter of 17%. If I just flip forward, we can have a a brief look at the different regions. So if we start with business area North, a very stable quarter for business area North. Actually, when we we lift the lid and and look into the individual countries and the individual companies, we see lots of areas to be pleased with, solid performance, continuing to develop the mix across our countries and finding those operational efficiencies. There is overall a slight decline in EBITDA as you see there, 2% down to SEK 177,000,000 EBITDA for the quarter.

This is is mainly due to project based activities that we have beginning to to come into business area north, and in this quarter, largely in the government, defense, and equipment area, which was extremely strong during q one last year, so in the comparable period. It’s a relatively small part of the region’s performance as as as many of you will know where the region north is is very stable by servicing the regions and the Kommoon. But we have introduced, which we’re happy about, a slight lumpiness with some of this project based activity, and that explains that slight dip in EBITA, in the quarter. I think it’s also important to note that we we feel very strongly that this is an important growing and an interesting area going forward. So we we have no doubts that, that it’ll be an important part of the business in the future.

Final note, just to to to mention, we have a a new distribution center, state of the art distribution center being built in in Gothenburg, and the the build and progress on that construction is going entirely as planned. So we look forward to getting the benefits of that in future years as well. And if you look over to the right hand side of things, can see the summary. Organic growth down 3% in the quarter on EBITA level, acquired growth contributing a little, so minus 2% overall adjusted EBITA growth, net sales growing at 2% in the quarter. Turning now to Business Area West on page eight.

Some some good attractive growth numbers we see in Business Area West. We see the net sales growing 19%, adjusted EBITDA growing 35%, and and the the effect of that is to to lift the margin by one percentage points versus the same period last year. The high organic growth levels in in Region West largely driven by the strong growth in patient numbers. For those of you that follow the details through the IPO process, you’ll know that we we managed to acquire some additional customer databases last year, and we are now running those through our system. And and as you see, they are contributing well to to Business Area West.

We also see continued improvement from the closer cooperation between our different companies in the region and particularly in the home care region home care area of business, which is which is delivering some nice results across the area. Two acquisitions that Johan mentioned earlier, HSL in The UK and Ireland and Myomana in The Netherlands. And then to the right hand side of the page, you can just see the summary again. Organic growth was strong at 24%, acquired growth 12%, and a small negative effect, as I mentioned earlier, the translation effect of euro reporting into SEK as the group currency. The final region business area is central, our youngest and newest and, fastest growing region, very much driven by the active, m and a agenda.

You see the overall net sales growth at 37%, EBITDA growth even stronger at 75%. And as you look over onto the right hand side of the chart here, you also see the the strong contribution of the m and a growth through that period at at 62% acquired growth in EBITA and 33% acquired growth in net sales. I think also worth noting that that we’re pleased to see that the activities that we’re doing to to get margins up, both the mix effect of the new m and a’s, but but also the operational effects on business that we already own are nudging the margin nicely in the right direction in in Region Central. A quick word from me on page 10 on on our over our k or EBITDA over net working capital when translated into English. It’s a metric that we will keep coming back to.

Extremely important to us given the diversity of the group, 50 companies in in different areas of business and different operating models, And to have a single metric that we can look at all of those companies on that that focuses us and focuses them on the operational efficient usage of capital is very powerful and and something we believe in strongly. So I will keep coming back to this. And in the quarter, we are happy to see again a small positive move continuing in the right direction. And I can just note, as we’ve had the question in the past, the ASCA target above 50% means that we want every single individual one of our companies to be above 50% rather than managing the group total to 50%. Yep.

And then just a final page for me just to to to mention a little bit on the the the debt, the cash, the leverage picture on page 11. I I maybe start on the right hand side of this chart. You will see our net debt to EBITDA has has dropped, primarily as a result of the capital injection we got during the IPO. So we took in 1,500,000,000.0 of new equity during that period. So the leverage is now down at 1.7, which as Johan mentioned earlier on in the presentation is giving us a little bit of a a firepower in the in the short and medium term to to do some more m and a’s, which we’re happy about.

One final note, cash flow, was a little bit lower in the comparison period, to to q one twenty twenty four. That’s, the the the vast majority of that effect comes from HSL, the acquisition that we just did. They have customers who have year end at the March 31, which means actually we build up quite a large chunk of accounts receivable in March, which is a phasing and a dynamic that we’ve not had in the group historically, but obviously will even out going forward as HSL, rolls into the group in full. I think that’s it for me. I hand back to you, Jan, for a few summary words.

Johan Falk, CEO, Asker: Yes. Thanks, Tom. Alright. So before we leave the word to you for q and a, just to summarize, I mean, I feel good about this Q1, as I mentioned. We have a solid performance, and we are where we should be.

It means over 15% EBITDA growth coming from both organic and M and A, which we are delivering of 17%. And showing the organic growth in markets, I mean, it’s partly due to this very stable market, underlying market in health care is growing with 3%, four % and us delivering more than that. We see as you saw now and explained by Tom, there could, of course, be quarter by quarter in some regions by project based. We can see some lumpiness in the cash flow as we saw in some but I’ve been here now many, many years. And over time, looking at this rolling 12, this is just normal business, so to speak.

So I’m very pleased to see this. And M and A, where we drive very hard to be in the forefront. We are today market leaders in Europe, and we see very little aggressive competition. I would say it’s healthy competition, very few times where we want to buy a company that they don’t sell to us to good multiples. So I feel good about the M and A part of our agenda, which is very, very important.

And also the strong balance sheet having giving us firepower for the future. So all in all, we’re a happy team, and we hope we have happy shareholders as well. So thank you so much. Now over to questions.

Conference Moderator: The next question comes from Karl Ragnarstam from Nordea.

Karl Ragnarstam, Analyst, Nordea: It’s Karl here from Nordea. A couple of questions from my side. Firstly, starting in North, you grew organically, but as you said, EBITDA had a slight organic contraction year over year. You mentioned defense in the comparisons, but I’m a bit curious to know more of the nature of the defense business or GD, as you call it. Is it typically one big order a year of delivery?

Or is it twice? Or how does it work? Is it also possible to sort of quantify how big deliveries were last year versus sort of a normalized year? And then finally, if you on this topic, expect a similar boost to come at some point during 2025 as well?

Johan Falk, CEO, Asker: Yes. Thanks, Karl. Johan here to start. I think the absolute majority of our business, the thousands and thousands of customers and institutions are healthy, steady health care institutions. On top of this, we have project based.

We saw during the pandemic, if you go a few years back, that it could be deliveries on a more project based nature that comes on top of the business. Nowadays, the pandemic has ended a couple of years ago, but now we have uncertainty in the world to the civil defense and Ukraine situation with wars, and all European countries are trying to strengthen their social defense, which partly means also health care articles and machinery. So different countries, especially in the North where we are strongest in this, they are buying products from us. Sometimes it goes with to Ukraine. Sometimes it goes to building our own civil defense.

So this is it’s not, you know, one deal a year, but it’s not 50 deals a year either. So that’s kind of one part of the defense thing. But it’s also, as you know, we have public customers, which sometimes you win tender and sometimes you lose a tender. So for a region and for a country, if you have lost the tender one quarter and you have won another, that can also differ. So usually, we see very smooth development.

But as you saw in North right now, it could happen occasionally, but it’s not normal for us to swing up and down this much. But it’s nothing to be worried about. So I will say that maybe I’ll leave the word to Tom to quantify this in some way, but it’s a smaller part of our business that comes on top of the normal health care supplies. What would you say, Tom?

Thomas Maas, CFO, Asker: No, I 100% agree with that. And I think that the it’s important to emphasize that it is a relatively small part of the business. And when you look at the numbers, 1,000,000 move moves the growth rate by 1%. So we’re not talking big effects here.

Johan Falk, CEO, Asker: I hope that’s

Karl Ragnarstam, Analyst, Nordea: Okay. That is yes, that’s very clear. And also looking at some disclosures in the report, seemingly your most recent big acquisition, HSL, did 13% margin when I look at it. Is that correct, firstly? And also, what seasonal variations do you see in that business between the quarter, I.

E, should we continue to expect it to deliver the Q1 level? Or do you see seasonality the remainder of ’25?

Thomas Maas, CFO, Asker: Yep. Do you want me to start that one, Jon? I can do that. Yes. So you’re right.

The margins are certainly above the group average nudging up into those sort of low mid teens levels. I think HSL does have slightly more seasonality than our typical businesses. I think when you look across the the other 49 companies in the portfolio, everyone has some degree of seasonality, but but but evened out across the the patch, the group as a whole doesn’t have significant seasonality. I think March in particular tends to be a strong month for HSL because as I say, the year end of of some of their major customers also coincides with March. But but otherwise, their performance also is relatively stable through the rest of the year.

But but we would expect yeah. Strong March, slightly slower in April, and then back to normal again through the rest of the year.

Johan Falk, CEO, Asker: Maybe what you could add to the HSL and is the cash flow. As you saw, the cash flow for the quarter is lower than normal, and that’s also due to HSL coming into the group. And they have a fiscal year that ends in March, meaning that they usually tie up more capital to in that quarter. So that’s part of the answer to that change.

Karl Ragnarstam, Analyst, Nordea: And do they release working capital in Q2 instead? Or is it Q3? Or how does it work with seasonality and cash flow?

Thomas Maas, CFO, Asker: That’s exactly the

Karl Ragnarstam, Analyst, Nordea: Okay. And the final one from my side is you touched a little bit upon it or quite a bit on the M and A pipeline. You closed quite a few acquisitions during second half twenty twenty four, now three year to date. Is the pipeline somewhat drained due to it and you need to rebuild it? Or should we see it as you also, on the other hand, you did the IPO, you maybe postponed some projects or processes during it, where why we could see a catch up effect?

How should we look at it?

Johan Falk, CEO, Asker: Yeah. I mean, it’s definitely not drained. I mean, the market is very attractive and will be so for many, many years. I mean, there is, as you know, 37,000 medtech companies. We have listed 4,000, and we have a shortlist of 800.

So over the next years to come, we will find good and attractive companies. That’s something I’m very, very sure about. Of course, I mean, it’s a matter of, you know, when you’re picking the best entrepreneurs as we do, we want to be quite picky, and we want to have a stable, nice growth of 10% EBITDA from M and A, sometimes a bit more, some it could be a little bit less. But most of the times, it’s becoming a bit more. And then I mean, as you can see right now, we have bought, I mean, three companies already during this year.

So from a financial point, we could we don’t need to buy anything more to kind of have that growth, but we have a very attractive pipeline ahead of us. I would say that we will manage this to pick good companies, high quality and add this, so we don’t buy much more than our cash flow. Now we have a strong balance sheet. So you could I mean, we could be we could add a little bit more than our cash flow if we like, which could be maybe a good idea. But I would say this has a smooth growth, both on organic and M and A.

And quarter by quarter, it can differ because it can be pushed. And usually, if we buy a little bit larger company like HSL, maybe we focus a little bit harder on that, and you can see the quarter previous and after maybe a bit slower. But for the rolling 12, you should expect us to do 10 to 20 deals and roughly 10% of our EBITDA on the group level.

Karl Ragnarstam, Analyst, Nordea: Okay, very clear. That’s all for me. Thank you.

Johan Falk, CEO, Asker: Thank you.

Conference Moderator: Next question comes from Eric Cassell from Danske Bank.

Eric Cassell, Analyst, Danske Bank: First question on West. I appreciate that a lot of the strength came from customers that you acquired. You talked about that. But I was wondering if that is something that you can continue to ramp on, meaning can you continue to grow sequentially from this level based on those sort of customers? And also, do you think that the margin level that we’re seeing in West is sustainable going forward?

Johan Falk, CEO, Asker: Yes. I think I mean, always, when you dig down into a region or a country or a company or a niche, I mean, there is you need to have a special discussion around that medical discipline in that country and that circumstance. So it’s always hard in these kind of calls to draw a drastic conclusion. What you should do is kind of lift yourself and to see I mean, all countries that we’re present in 17 markets have the same need. We have, as human being, identical needs, and that translates into to to the same need of products as well.

So for me, the market is growing with 4%. We are growing now with 6%. We should grow, you know, twice the speed of the market is is my ambition, and that is spread across. And then if you go down the level, you have, of course, more attractive companies, segments that are growing faster sometimes, and some are growing a bit slower. But then you could also see that the scale effects in The Netherlands, we have bought quite a lot of companies.

We now have roughly SEK 7,000,000,000 sales and a lot of scale effects in The Netherlands, also adding to organic growth, the gross margin and the net profit. So if anything, I think we have a strong possibility to kind of continue growing, seeing scale effects and also positive margin movements over time. So that’s kind of where how I view it. But it’s very hard to analyze on a country, company or market segment basis. So you should always kind of move up and look at the bigger numbers and over time.

Eric Cassell, Analyst, Danske Bank: I’m thinking sort of specifically on the customers that you acquired, a couple of months ago. I guess there were thousands of them and that you sort of ramp and process maybe on each and every one. But

Johan Falk, CEO, Asker: Okay. Okay.

Eric Cassell, Analyst, Danske Bank: And I was just more wondering if if you can still gain more volumes from just that sort of customer acquisition that you did back then?

Johan Falk, CEO, Asker: Right. Sorry, I maybe I misunderstood your question. That’s it’s a good question. And I mean, of our growth comes from M and A. That’s pretty straightforward.

Part of it comes from just winning tenders or customer deals, pretty straightforward. But part of it is also what you saw now in The Netherlands, where we have taking over customer databases or customer agreements that can add to our organic revenue. So that’s something that is very positive part of the organic growth. But exactly what that translate into numbers, it’s very hard to say, but it’s something on the positive side, absolutely.

Thomas Maas, CFO, Asker: I I Eric, I would maybe also say that we

Karl Ragnarstam, Analyst, Nordea: Oh, sorry.

Thomas Maas, CFO, Asker: No. Go ahead.

Eric Cassell, Analyst, Danske Bank: Yeah. Thomas, listen.

Thomas Maas, CFO, Asker: No. I was just I was just gonna say, you you know, obviously, we have a a one off step up as we take over, you know, a a large injection of of of new customers, but there is underlying growth on top of that as well. It’s not just the growth only comes from from adding a single new customer, and and and if you add all of those customers in one go, somehow, there is no growth in the future. You continue to work with those customers. You continue to find new new areas of developing the business, improving how you service those customers to get the margins up.

So so there is a there is an element of a one off step up, but but it’s not a a one off step up that precludes growth in the future.

Eric Cassell, Analyst, Danske Bank: No. Exactly. I understand this is a step up. I more wanted to understand if it’s the step has been fully taken, so to say, if you’re at the new level already, if you

Karl Ragnarstam, Analyst, Nordea: Uh-huh.

Eric Cassell, Analyst, Danske Bank: Continue to to ramp in q two. Got That was more the question.

Charles Weston, Analyst, RBC Europe Limited: Yeah. Yeah. Okay.

Eric Cassell, Analyst, Danske Bank: Sorry, We can get to that some other time maybe. I was also interested on the sort of pricing adjustments that you can make for ’25. I saw that the December print, which seems to be pretty important for a lot of OneMed contracts, was fairly strong. But of course, that isn’t all of your business. I was more now interested in the customary pricing adjustments that you tend to make in end of Q1, how those have come out and what sort of pricing, let’s call it, tailwind that you can see for 2025?

Johan Falk, CEO, Asker: Yes. I would say that our pricing adjustment is a normal part of our business. And given the magnitude of number of customers, I mean, no customer is larger than in a percentage, and we have hundreds and hundreds of agreements. So we are floating as a cork on the water, I usually say. So we are in a very good position of making sure that if there is raw material changes or if there is, you know, other effects, we usually adjust in a smooth way towards the customer.

So there is very little drama for us in our role as a service provider. So if the customer are in great need of something, we make sure that it’s there. And as we have seen during the pandemic and others, if there’s a shortage and price points move a little bit up and down, that’s also how our price points move. So and you should not also not expect us to kind of go aggressively and put higher prices up and you see a very much higher trading contribution. What you should see is think about this as we have an aim to go to a 10% EBITDA margin over time.

That will come from partly operational excellence. We’re fine tuning the business every day, so we lower our cost. We’re using our scale of the group. We’re pricing and giving the customer a good service. So all of that combined will take us from 9% to 10% in the midterm.

That’s how smooth and slow it will move rather than aggressively pricing one quarter and having an effect. So it’s kind of evened out over the group.

Eric Cassell, Analyst, Danske Bank: Okay. Okay. But there’s no you can’t quantify what sort of the average pricing effects can be for twenty five to sort of help us understand the the volume price mix for organic growth?

Johan Falk, CEO, Asker: No. I I I think it becomes too complicated. And when you go down, of course, we can dig out the company and talk about that company and price point, but it won’t help you. So I think the best way to look at this is kind of from the top down level. We now have 50 companies.

We’re gonna add, 20 companies per year, so it will be impossible to follow this on a price point company level. So thinking about this as a smooth ride and focus on the stable organic growth, stable M and A growth and gradually taking us to 10%. That’s kind of the best way to analyze this. A bit boring maybe, but it’s also stable, and that’s the best way to analyze the future. At least, well, that’s what I do when I’ve been here thirteen years.

It’s hard to to do the other one.

Eric Cassell, Analyst, Danske Bank: Okay, Jan. Okay. I I like boring. That’s fine. I’ll jump back in the queue and come back if there’s any more time in the end.

Thank you.

Johan Falk, CEO, Asker: Thank you.

Conference Moderator: The next question comes from Robert Redden from Carnegie. Please go ahead.

Robert Redden, Analyst, Carnegie: Yeah. Hi. I’m sorry for asking about this again, but but, on on the those product deliveries in Region North to, depends or preparedness, I call it, did you have those deliveries in q two, q ’3 last year? What what are the comparisons, like in in the coming quarters for for Region North in that team?

Thomas Maas, CFO, Asker: Yeah. I can I can say last year, I I think we had a a relatively steady flow of of GDA activity through the course of of of all quarters last year? So we we we definitely are seeing a little bit more lumpiness this year so far. But I I think it’s it’s also important something. It’s also important, Robert, again, not to to to overstate the scale of it.

As I as I say, when you when you look back at the numbers, the, you know, the effect from a a plus 2% growth to a minus 2% growth is is 3 or 4,000,000 SEK in in one individual region. So it’s, yeah, it’s important to keep it in context.

Robert Redden, Analyst, Carnegie: Okay. Perfect. And then, also, on Regent West, this, patient database is acquired. Was that the the deal done in November? Should should we assume that this is sort of a positive for organic growth in Regent West for for the period up until October or or around?

Karl Ragnarstam, Analyst, Nordea: Right. That’s right. Yeah.

Robert Redden, Analyst, Carnegie: How should

Charles Weston, Analyst, RBC Europe Limited: we think about that?

Thomas Maas, CFO, Asker: You you you should, expect to see some positive certainly through q two and and and q three and a a little bit less after that.

Robert Redden, Analyst, Carnegie: Okay. Perfect. And then, yeah, maybe something on FX. I mean, it changed a lot in March. Yes, we understand that the foreign profits get translated back to SEK, but are there any other, effects we need to think about, for Q2?

Any, impacts on, I don’t know, margins or FX or net financials?

Thomas Maas, CFO, Asker: Yep. You’re absolutely right. So the FX effect is mainly a translation effect, mainly a euro into SEK effect. And as you say, the big effect actually don’t come until Q3, Q4 sorry, Q2, Q3, Q4 this year, a little bit coming right at the March, Q1. I think the only other effect to note, but it’s an effect that comes much it’s much more slow moving and and will come much later on in the year is is we do have a little bit of product sourced in dollars from the Far East, and obviously, the dollar is is a little bit weaker as well.

So so there there may be some upside there, but but but much later in the year. So those are the two main FX effects. They also obviously have an effect on the financial net because of our our debt position and and some of our hedges. But, in terms of the p and l, those are the two main effects.

Robert Redden, Analyst, Carnegie: Perfect. Thanks so much.

Johan Falk, CEO, Asker: Thank you. All right. I think if there’s no more question, thanks a lot again for participating in this Q1 presentation.

Conference Moderator: The next question comes from Charles Weston from RBC Europe Limited. Please go ahead.

Johan Falk, CEO, Asker: Please.

Charles Weston, Analyst, RBC Europe Limited: Hi. Sorry to ask when I’m right at the end there. And apologies if this is something that you’ve talked about already during the IPO or I’m fairly new to the company. But some of your peers talked about medtech manufacturers moving some of their distribution away from direct in some markets to indirect distributors. And I was wondering if you could comment on what you’ve seen in terms of that trend and also whether during that process, medtech manufacturers are consolidating their distributors to deal with multiple countries or even multiple regions rather than dealing with lots of different distributors?

Thank you.

Johan Falk, CEO, Asker: Yes. Thank you. This is a very good question, where a lot of my focus is right now. I think this is a very positive addition to our growth story going forward. You all know that we have organic growth faster than the market, and we have this M and A growth.

But over time, we’re starting to see a clear trend that product companies, OEMs, instead of being direct in account for they go towards a company like ourselves that have a total service offering, know the customer and can put a complete offering together with both knowledge and products. If we look at U. S, which is a bit more consolidated than Europe, we see that a higher proportion of the solution provider sales is has moved from a direct to an indirect distribution, which is in favor for Askr. We see that trend is quite clear. It’s very slow at the moment, but it’s very clear the direction.

So over the mid to long term, this is a very attractive move, which is kind of release some revenue in the market. You should not expect any dramatic move in this, but it’s something to give us a tailwind of this growth. So the trend is clear. The pace is low, but it gives us attractive opportunities. And as always, being the market leader as Asker is, you tend to be the one who people wants to play with.

So we have a lot of inbound calls from OEMs in Europe right now that wants to have a discussion of how the future looks like. So thanks for a very good question. This was something that will be on the topic for years to come.

Charles Weston, Analyst, RBC Europe Limited: Thank you. Can I just clarify, is that across all types of medical devices and supplies, sort of low touch supplies versus high touch, maybe high end CapEx equipment? Would it be across everything?

Johan Falk, CEO, Asker: Yes. I mean, there is a clear kind of two by two matrix here. If you have a small country in Europe and you have a higher indirect distribution. If you have a large country like Germany, France and UK, you have a bit of a lower. So there is a kind of a sliding scale here that OEMs tend to be present in those markets.

So larger market, higher degree of direct, lower smaller market. And then there’s also the other axis is supplies to a very complex installations. I used to work at Gething before and installed CSSDs in hospitals. I mean, we will not take on the project of installing a new hospital CSSD. That’s something for getting it to do with those large project over two years of time.

Having said that, we have products from the simplest commodities to very complex equipment as well. So you there is a very few areas of the large equipment that we’re not present in, but there is it requires more from a service provider as ourselves when you have a higher take HSL as a good example. They are very complex service provider with high degree of service level. So that’s a good example where you successfully have gone with the OEMs to the market, and you are the one that meets the customer and they’re satisfied with it. So that’s you will see a gradual shift over time in this.

So larger and larger market would come into play and larger, larger equipment. And you will see at the end of this, in the end game, you’ll see this faster exponential growth in this area. I’ve been part of this myself when I consolidated industrial supplies for ten years, and I saw this quite dramatic shift at the end of the journey. Now we are in the beginning of the journey, but I see the tendency is very clear here, which is a positive thing for Asker.

Charles Weston, Analyst, RBC Europe Limited: Thank you. And my second question, if I can, please, is around multiples on M and A. I’m not sure what you disclosed during the IPO process, but is there a range you’ve typically paid? What’s the trend in that range? How does it what does it depend on in terms of your target?

Johan Falk, CEO, Asker: Yes. We have a look at our target list, and we have done now 50 acquisition. We’ve turned down maybe 100 cases. So we have a big pipeline of statistic data points, and we have paid in absolute mathematical median or average seven times EBITA for these companies. So we have a span of six to eight times EBITA, what we usually pay.

So that’s healthy levels, where we have where we see no reason why this should change. And we have been doing a lot of acquisitions previously in my life as well. And when you buy companies of this size of 100,000,000 to 300,000,000, you play in a category where large private equity and large professional customers is hard to access. The larger deals that are in process that are coming up to close to 1,000,000,000 in revenue, then you see multiples moving because they get access to large capital. But for us, we are usually having bilateral discussion in a if we buy a small company in Switzerland, they know who the best player is in the neighboring segments, and they maybe know them for ten years.

So when they are ready to sell, they want to come to Askr, both because they like Askr and our vision, and they have seen us taking good care of entrepreneurs. So I will not foresee that these multiples are going upwards. I think there is counterbalancing factors of having Asker being a stronger and more attractive partner to them that also wants them to come here. And then it’s very seldom that it’s only price that is the matter for this. So six to eight times is something where we see definitely in the midterm where we’ll buy companies for.

Charles Weston, Analyst, RBC Europe Limited: Thanks very much. Congrats on the IPO.

Johan Falk, CEO, Asker: Thank you. All right. With that, I think maybe we close this session. And once again, thank you so much for taking the time.

Thomas Maas, CFO, Asker: Thank you.

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