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In the Q2 2025 earnings call, Husqvarna reported a robust revenue increase of 28% year-on-year, reaching $714 million. Despite this growth, the company’s stock price saw a slight decline of 0.64% in the open market, reflecting investor concerns over negative free cash flow and high leverage. According to InvestingPro data, the company’s current valuation suggests it may be undervalued, with analysts setting price targets between $8.38 and $11.17.
Key Takeaways
- Revenue surged by 28% compared to the previous year.
- Order backlog increased by 40%, indicating strong future demand.
- Free cash flow was negative at $12 million, raising financial stability concerns.
- The stock price fell by 0.64%, reflecting cautious investor sentiment.
- No dividend is expected until leverage reduces below 2x.
Company Performance
Husqvarna demonstrated significant revenue growth in Q2 2025, with a 28% year-on-year increase, totaling $714 million. This growth is attributed to strong performance in the Danish detached housing market and strategic initiatives such as opening new sales units and showrooms. However, the company’s financial health is under scrutiny due to negative free cash flow and high leverage.
Financial Highlights
- Revenue: $714 million, up 28% year-on-year.
- Gross Profit: $136 million, with an 18.4% margin.
- EBITDA: $23 million, with a 3.1% margin.
- Free Cash Flow: Negative $12 million.
- Net Interest-Bearing Debt: $4 million, with leverage at 3.2x.
Market Reaction
Despite the positive revenue growth, Husqvarna’s stock price fell by 0.64% in the open market. The stock trades at $7.22, closer to its 52-week low of $6.84 than its high of $10.55, indicating a generally cautious market sentiment. The decline reflects investor concerns over the company’s financial stability, particularly its negative cash flow and high leverage. However, InvestingPro analysis shows a current ratio of 1.68, indicating sufficient liquid assets to meet short-term obligations.
Outlook & Guidance
Husqvarna maintains a positive outlook, with full-year revenue guidance set between $2.9 billion and $3.1 billion. The company expects to deliver 1,000 to 1,100 units and projects EBITDA between $110 million and $130 million. This optimistic guidance aligns with InvestingPro data showing expected profitability this year, despite current trailing twelve-month losses. For detailed analysis and forecasts, including exclusive ProTips and comprehensive valuation metrics, explore the Pro Research Report available on InvestingPro. However, no dividend is anticipated until leverage is reduced below 2x, highlighting ongoing financial constraints.
Executive Commentary
"We remain positive and confident that we are on the right track to benefit from the market rebound," said Alan Arnelsen, CFO. CEO Martin Arnlinson added, "We are handling all customer requests," emphasizing the company’s proactive approach to addressing operational challenges.
Risks and Challenges
- Financial stability is a concern due to negative free cash flow and high leverage.
- Macroeconomic conditions could impact consumer confidence and housing market demand.
- Operational challenges, such as handling customer requests related to mortar joint issues, need careful management.
Q&A
Analysts inquired about the isolated HC elements issue and its impact on larger projects. The company clarified that the issue is contained and not affecting broader operations. Additionally, sales in the detached segment are in line with expectations, with no significant organizational ramp-up anticipated in the near term.
Full transcript - HusCompagniet AS (HUSCO) Q2 2025:
Conference Moderator: Welcome to Whose Company Holdings interim report for the 2025. Today’s call is being recorded. I will now turn the call over to your speakers. Please begin.
Martin Arnlinson, CEO, Husqvarna: Good morning, and welcome to the presentation of Husqvarna’s financial results. I’m Martin Arnlinson, CEO of Husqvarna. As usual, CFO, Alan Arnelsen, is with me today on this call. We will begin with a view on the overall market condition and then present the result for q two and the ’25. We will end the session by answering your questions.
We’ll start with a few comments on the market condition on Slide two. In the 2025, global political and macroeconomic turmoil continued to impact overall consumer confidence. However, the Danish housebuilding market showed great resilience with a continued pickup in sales. The detached market in Denmark continued the gradual recovery at a steady pace. This was reflected in a satisfactory number of consumer and customer leads and meeting activity throughout the period.
We want to maintain the momentum and to further strengthen our presence in judgment, and therefore, we will open a new sales unit with a showroom in Horsens and a dedicated Forum office in Aarhus. Both openings openings are expected in q four. The market development was supported by a strong performance of the economic in Denmark. This was based on a unchanged high employment rate, steady core inflation, and positive views on interest rates trends. Overall, it means that we remain positive about the continued and the gradual market rebound.
With this overview, Alain will take us through the highlights for Q2 and the first half of the year. Please turn to Slide three. Thank you, Martin, and good morning to everyone on the call. For the fourth quarter in a row, we saw satisfactory year on year revenue growth based on the continued pickup in sales.
Alan Arnelsen, CFO, Husqvarna: Revenue increased by 28% to $714,000,000 driven by higher sales in recent quarters in the detached and semi detached businesses in Denmark. The increase in revenue was driven by more deliveries and a high activity level with a good contribution from work in progress. We were pleased to note that the Detach segment continued to grow sales throughout the period even though we were at the center of a critical meter coverage related to issues with crumbling mortar joints in some detached houses constructed during 2017 to 2022 among other things. We have been aware of these issues in recent years, and we are handling all customer requests. Following the meter coverage, we have been approached by a limited number of customers and entered constructive dialogues to assess and accommodate cases where relevant.
We have registered fewer new cases and a lower increase in provisions in h one despite the META coverage in June. Back to the numbers. Gross profit grew by 13% to 136,000,000 for a margin of 18.4%. This is 2.3 percentage points lower than the same period last year. This development was largely due to the semi detached business and reflected that we noted unsatisfactory margins on a few HC elements projects, which are also seen to have some impact on q three twenty twenty five.
In addition, we did not deliver any projects in the semi detached business in the quarter, which is a matter of timing. I also remind you that we reclassified staff costs related to production employees at our factories in Esquire and Sweden in q one twenty twenty five. Staff costs are presented as part of cost of sales instead of SG and A. EBITDA declined by 4,000,000 to 23,000,000 for a margin of 3.1% compared to 4.7% last year. This development reflects the decline in gross margin and higher SG and A and staff costs due to the balanced ramp up of our organization.
We have onboarded new employees to support increasing sales across the detached and semi detached segments as well as our ability to see future opportunities. EBIT came to 12,000,000, down from 15,000,000 in the same period last year. Free cash flow was negative by 12,000,000 in the quarter, which was a significant decline from the comparison period and as expected. The decline was driven by changes in working capital due to the higher activity level and an increase in inventories as sales growth was higher than deliveries in a period with good momentum. Let’s go to Slide four and the highlights in the first half of the year.
For the 2025, revenue increased by 29 to 1,375,000,000, driven by all segments and reflecting the continued sales progress in recent quarters, leading to higher activity levels and an increase in revenue from work in progress. The development was also supported by a slight increase in deliveries, which totaled 394 units compared to 382 units in the same period last year driven by the DTAG segment. Gross profit increased by 12% to 260,000,000 for a margin of 18.9%. This was three percentage points lower than the 2024. The Detached and Wooden Houses segments contributed positively to the improved gross profit.
The contribution from semi detached was lower mainly for the same reasons mentioned for q two as well as due to a changed product mix. This was EBITDA came to 39,000,000 for a margin of 2.9% compared to 49,000,000 and a margin of 4.6% in 2024. The decline was due to the lower contribution from semi detached following the unsatisfactory low margins in HCL elements and the higher SG and A expenses and staff costs already mentioned. EBIT amounted to 18,000,000, down from 24,000,000 last year. Free cash flow was negative by 26,000,000.
And as for q two, it was a decline compared to first half last year and also here driven by changes in working capital and deliveries. This is a combination of phasing. So we have increased sales and phasing in deliveries where the timing is slightly different. Free cash flow was in line with our expectations. Net interest bearing debt came to $3.00 $4,000,000 at end June with a leverage of 3.2 compared to a net debt of $236,000,000 and a leverage of 2.4 in June 2024.
The development was driven by changes in working capital and the decline in EBITDA. We continue to monitor our leverage closely. On a separate note, we also want to provide a brief update on our dialogue with the Danish tax authorities concerning the reversal of deduction of marketing contributions to foreign subsidiaries in 2019 to 2020 as described in the annual report. In July, the authorities passed a ruling in line with our expectations, meaning that the effect was already reflected and recognized in the 2024 consolidated financial statements. The authorities also revoked their initial decision to deny reopening and correction of the taxable income statement for 2020, which could have entailed additional tax and interest expenses of 25,000,000 in total.
These developments provide some certainty, and we are currently considering if we will take further legal action. With this, let us go to slide five on overview of sales from Martin.
Martin Arnlinson, CEO, Husqvarna: Thanks, Alan. In q two, the detached segment maintained a positive track and increased sales by 13% compared to the same period last year. We were very pleased to note the continued momentum based on high consumer satisfaction and loyalty. Total sales across segments was 6% lower and came to $3.45 units, but the decline was mainly due to timing of orders in SIMDET test where sales were down by 34% compared to a strong q two twenty four. The development was impacted by timing of billing permits for several projects.
And please note that the contract for 106 units with Trelenda announced back in October is still not included in simmestat sales as the billing permits is pending. And in addition to this, we signed a three stage b to b contract with Wellcome for 191 units and raised it during q two. The first stage compromised of 83 units and are included in the sales for the quarter. And we will register the two remaining stages when they are accepted by Welcom in line with the terms of the contract. And finally, we recently signed a subcontract agreement for 160 units in Bauschware.
All relevant permits has been obtained, and these units will be expected to be included in q three sales. Please turn to slide six and update on Deliris. In q two twenty five, we delivered 199 houses, a decline of 7% compared to the same quarter last year. The detached business delivered 10 units more than last year and wooden houses in Sweden, seven house more. The decline was a result of timing of projects in semi detest segments where we did not register deliveries in q two.
Several projects are currently being executed in this segment, which will contribute with deliveries in the coming period. Let’s flip to slide seven and our order backlog. Due to the good sales traction in recent quarters, we continue to build a strong, solid net order backlog, which increased by 40% to 2,100,000,000.0 at the end June compared to the same period last year and 9% up from the beginning of this year. All segments contribute to the positive development. The test across the the the test accounts for 70% of the total air order backlog, 70 tests, 25, and wooden houses in Sweden for 5%.
It is worth noting that the backlog does not include the condition b to b orders with to land up for 106 units, the remaining 108 units for Welcom, or the newest order for 156 units in Bauschware mentioned before as well. Please turn to slide eight for Alan’s comments on the outlook.
Alan Arnelsen, CFO, Husqvarna: Thank you, Martin. Based on our financial performance in the 2025 and expectations for the remainder of the year, we narrow our guidance for the full year. We now expect revenue to be within the range of $2,900,000,000 to $3,100,000,000 This is based on an increase in revenue from work in progress and deliveries are assumed to be between one thousand and one thousand one hundred units. Earnings are expected to reach 110,000,000 to $113,000,000 $130,000,000 in EBITDA and $70,000,000 to $90,000,000 in EBIT following the impact of unsatisfactory margins on the projects mentioned in the Roche elements, which will also impact q three to some extent. Despite the continued political and macroeconomic uncertainty, We remain positive and confident that we are on the right track to benefit from the market rebound in detached, and we are pleased with the performance in h one.
At the same time, we are leveraging our position in the semi detached segment and winning new contracts and more business. Our leverage was 3.2 at the end of the quarter, and we still expect to stay within the covenants of our financing agreement in 2025. As previously mentioned, dividends are not expected to be reintroduced before our leverage is below 2x net debt to EBITDA. Thank you for listening in. Now please turn to the next slide for the Q and A session.
Conference Moderator: The first question we have is from the line of Sebastian Grave from Nordea.
Sebastian Grave, Analyst, Nordea: The first one is on the miss here on HC elements for the quarter. So just trying to get a better understanding of the nature of the issue and also thinking of I mean, you talk about this also impacting q three. I I don’t think is is it to be sort of understand in the way that it does not affect beyond q three and that this is sort of a an isolated issue? Yeah. That would be my first question.
Alan Arnelsen, CFO, Husqvarna: Yeah. So the thing is we had a few and and thanks for your question, Sebastian. So we had a few projects with h two elements, which did not turn out the way that we originally had expected. We have taken actions to mitigate the risk of this happening again without me being able to be more firm on what what was actually happening. But I can tell you that we have moved a lot closer to HE elements concerning this specific area, both from a contractual point of view and from a financial point of view.
And, yes, just to comment on your question regarding q three, we do expect an impact in in q three, and and we don’t anticipate an impact in in q four from these specific cases.
Sebastian Grave, Analyst, Nordea: Okay. Okay. That’s nice. So just just to be to be very clear here, this has nothing to do with the sort of execution on your larger semi detached projects, I. E, the ones that you highlight in your h one report on page eight?
Alan Arnelsen, CFO, Husqvarna: That is correct.
Sebastian Grave, Analyst, Nordea: Very good. Then on on the the current trading, how does the 54 units sold in July in your detached segment square with with your sort of own expectations for the year?
Martin Arnlinson, CEO, Husqvarna: Actually, it it is in line what we have expected. So so overall, it it is, yeah, it is it is positive and and actually what we have what we have expected.
Sebastian Grave, Analyst, Nordea: And and does that mean, Martin, that you’ve seen sort of no no larger impact on the sort of your the activity from from from this yeah. As you also mentioned, the the publicity negative publicity in from June?
Alan Arnelsen, CFO, Husqvarna: So so currently, what we are currently seeing and following the negative publicity, we are we are satisfied with the performance that we are currently seeing.
Sebastian Grave, Analyst, Nordea: Okay. That’s fair. And then my my last question for now, and I will get back to the queue. So the the 156 SemiTouch order that you you you you’ve announced here this morning, Noting that this is a subcontract agreement, how how does that compare to to a turnkey turnkey turnkey agreement? What’s the difference here?
And what’s sort of what what is your role in in this?
Martin Arnlinson, CEO, Husqvarna: That actually we our contract is that we we are almost billing about 90% of all the houses. So so it is it is, yeah, a a subcontract, but but it is mainly us. We are the entrepreneur and the the full the full contract on that.
Sebastian Grave, Analyst, Nordea: Okay. Sounds good. Thanks for for taking my questions.
Alan Arnelsen, CFO, Husqvarna: Thank you.
Conference Moderator: The next question we have in the queue is from Christian Tornow from SEB. Please go ahead. Your line will now be unmuted.
Christian Tornow, Analyst, SEB: Yes. Thank you. Also a couple of questions from my side. So just to the guidance change on EBITDA. So the fact that you lowered the higher end by €30,000,000 can that be interpreted as this issue around 80 elements costs you 30,000,000, or are there any other changed assumption which drives down the upper end by 30,000,000?
Alan Arnelsen, CFO, Husqvarna: Thank you for your question, Christian. So what we are unfortunately have experienced here with HE elements is also the reason why we are taking down guidance from from our original and and lowering to the levels that you’re seeing now.
Christian Tornow, Analyst, SEB: K. So so there are no other major change assumptions behind that? Nope. No.
Martin Arnlinson, CEO, Husqvarna: And and that’s to addition to that, we can see now when we those it’s c elements that have an impact on the you can see the the top of the guidance, and therefore, now we we can see more about the the whole year for now, and therefore, we are we are making that the change.
Christian Tornow, Analyst, SEB: Makes sense. Makes sense. So that’s that’s fine. My other question was was more on the SG and A cost in the test and and just sort of an update on on what you think going forward. To to what extent are you still expecting to to ramp up your organization?
You you still show growth on the orders, so so does that require you keep adding more people? Can you, yeah, elaborate a bit on that balance?
Alan Arnelsen, CFO, Husqvarna: Yeah. I I would say that we have taken the largest part of the ramp here by the ’24, second half twenty four, start the first half twenty five. So we expect a more limited ramp throughout the throughout the year.
Christian Tornow, Analyst, SEB: Okay. So so when I make my s g and a estimate for next year in in the test segment, should I primarily be thinking about sort of inflation as as the component, or or will you also see an sort of a ramp up on on the organization there?
Alan Arnelsen, CFO, Husqvarna: I think there there are a lot of, you know, a lot of things that can impact that, but we don’t see expect a significant ramp in the in the number of employees.
Christian Tornow, Analyst, SEB: Okay. I think
Martin Arnlinson, CEO, Husqvarna: also I did so that it also depends of the sales for for h two this year. Is it a significant ramp in sales? Then we have to have a look on on the FDA to to you can see, fulfill the the the orders in in in ’26. So so, of course, it depends it depends on but as we as we see now, we we we don’t see a lot of new hireings that way.
Christian Tornow, Analyst, SEB: Okay. So so at the current pace, you have the organization needed, and and then if if things go further up, then then that might change the assumption.
Alan Arnelsen, CFO, Husqvarna: It it it will be more limited, and we will always try to balance the the two things. Yeah.
Christian Tornow, Analyst, SEB: Excellent. Alright. Excellent. That was all for me. Thank you.
Martin Arnlinson, CEO, Husqvarna: Thank you. Thank you.
Conference Moderator: It does not seem like we have any further questions from the conference call. So I’ll hand back to the speakers for any closing remarks.
Martin Arnlinson, CEO, Husqvarna: Alan and I just want say thank you again for taking an interest in who’s coming in. And if you have any follow-up question, please reach out to us, and have a nice day.
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