A MIXED Q2, INVESTMENTS FOR FUTURE GROWTH, INCREASE IN RECURRING REVENUES
“Q2 was a quarter of turbulent macro conditions. This impacted QleanAir's ability to grow and contributed to a 4% decline in our sales compared with the previous year. At the same time, it was a quarter in which our business model, large customer base, product mix and good underlying profitability meant that we continued to deliver a strong gross margin of 71.8%, despite disruptions in the supply chains. The installed base is growing, and recurring revenue increased by 9%. In the quarter, we increased investments in marketing, business development and our sales organization, while prioritizing investments in product development and innovation, which increased variable operating costs. We increased the volume of clean air delivered,” CEO Christina Lindstedt notes.
A MIXED Q2, INVESTMENTS FOR FUTURE GROWTH, INCREASE IN RECURRING REVENUES
April–June 2022 in summary
- Net revenue totaled SEK 108.3m (112.3), currency-adjusted net revenue totaled SEK 107.0m.
- Units installed 11,625 (10,746)
- Recurring revenue SEK 69.8m (64.0)
- Order intake SEK 89.3m (91.6)
- EBITDA SEK 18.9m (28.0)
- EBITDA margin 17.4% (24.9%)
- Operating profit (EBIT) SEK 11.3m (20.8)
- Operating margin 10.4% (18.5%)
- Profit for the period SEK 7.6m (14.9)
- Earnings per share SEK 0.51 (1.00)
- Operating cash flow SEK 9.0m (36.2)
January–June 2022 in summary
- Net revenue SEK 223.7m (222.8), currency adjusted net revenue amounted to SEK 219.5m
- Units installed 11,625 (10,746)
- Recurring revenue SEK 138.8m (128.9)
- Order intake SEK 206.3m (193.5)
- EBITDA SEK 44.0m (54.8)
- EBITDA margin 19.7% (24.6%)
- Operating profit (EBIT) SEK 28.8m (40.7)
- Operating margin 12.9% (18.3%)
- Profit for the period SEK 21.3m (35.7)
- Earnings per share SEK 1.44 (2.40)
- Operating cash flow SEK 8.8m (60.5)
Significant developments during the second quarter
- QleanAir wins the first orders for industrial Air Cleaners in Japan
- QleanAir launches IoT platform to measure, control and improve air quality in real time
- QleanAir strengthens its position in air cleaning solutions for schools and offices in Germany, and meets new tough requirements from the German VDI
- QleanAir announces a major renewal order from the Finnish prison sector
Significant events after the end of the period
- QleanAir signs two Letters of Intent with two major US health systems for large Cleanroom projects
- QleanAir increased the delivery of cleaned indoor air to 5.88 billion cubic meters per month at the end of the second quarter, an increase with 23% compared to Q2 2021
A WORD FROM THE CEO
“Q2 was a quarter of turbulent macro conditions. This impacted QleanAir's ability to grow and contributed to a 4% decline in our sales compared with the previous year. At the same time, it was a quarter in which our business model, large customer base, product mix and good underlying profitability meant that we continued to deliver a strong gross margin of 71.8%, despite disruptions in the supply chains. The installed base is growing, and recurring revenue increased by 9%. In the quarter, we increased investments in marketing, business development and our sales organization, while prioritizing investments in product development and innovation, which increased variable operating costs. We increased the volume of clean air delivered,” CEO Christina Lindstedt notes.
A strong quarter in Japan, APAC
With a reopened society, we continued to grow in Japan. Sales increased by 11.5% to SEK 53.2m and order intake increased by 21% to SEK 37.9m in the quarter. Japan contributed very positively to QleanAir's profitability and is the largest country. I am very pleased with the development in Japan and continue to see great potential in addressing new segments and introducing new products. We see good opportunities for continued growth and are expanding our sales team in the region.
In EMEA, the uncertain world situation affected our customers' investment decisions
Europe had weak development in the quarter with both a decline in sales of 8% to SEK 50m and in order intake of 6% to SEK 46.7 million. While the uncertain global macro situation meant delayed customer investment decisions in certain projects, we also took a number of significant orders for delivery in the second half of the year. Germany and Sweden continue to account for most of our sales of air cleaners in Europe, but we also see an opportunity in the future to increase sales in other countries in Europe where we already have a presence.
The Americas, which is our smallest market in terms of turnover, had a weak quarter, both in terms of order intake and sales. Towards the end of the quarter we started to see the results of our efforts in the US. Q3 has started off great, with continued order intake and in addition, we have communicated two signed letters of intent for future larger cleanroom projects for a total value of 1.8 MUSD. Our team in the US has a high activity level. The focus in the US is on broadening our customer base and expanding our network of collaborations to generate more business. We look positively at our opportunities to lift our business in the Americas to growth and profitability.
Continued good profitability in the underlying business, investments in business development, innovation, and sales resources
The war in Ukraine and its impact on the global economy has resulted in continued high material prices and disruptions in global supply chains. Generally, the market situation involves greater uncertainty. A large percentage of our revenue comes from the existing installed base and is not affected by material price increases to the same extent as new installations. We continued to implement price increases within certain parts of our offering, which contributed to a strong gross margin of 71.8%. Investments in business development, marketing, innovation, and sales resources increased the second quarter’s variable operating costs. The sales volume in combination with increased variable costs in the quarter lead to an EBIT level of 10.4%.
During Q2, we launched QleanAir Connect, an IoT platform to measure, control and improve air quality in real time. With QleanAir Connect, we strengthen the content of our service offering further. During the quarter, we also communicated that we now have air cleaning solutions that live up to new, tough requirements from the German VDI for schools and offices, which further strengthens our offering towards these customer segments in Germany, but also outside Germany. Both QleanAir Connect and our VDI-certified products will be important tools for driving growth going forward.
Growth of 8% in the installed base increased the volume of cleaned air
We continue to grow the installed base, which increased by 8 percent in the quarter. The amount of clean air delivered increased by 23% compared to last year. The majority of growth in the installed base was in Air Cleaners, where we have a lower average price than in Cabin Solutions, which explains that the growth in sales does not match the growth in the installed base. Sustainability has always been a central part of QleanAir's offering and business model. We are proud to contribute to a healthier, safer, and more productive workplace for more and more customers every quarter. In total, we have approximately 3,000 customers globally.
Outlook
QleanAir has a strong focus on profitable growth. We are currently affected by uncertainties in the global economy, which to some extent leads to longer and sometimes postponed investment decisions by our customers. This affects our ability to grow in the short term. The air cleaning problems we solve are global problems, and our solutions are global. In the medium term, we continue to see good opportunities for growth in all our geographies and product areas.
I would like to take this opportunity to thank the entire team at QleanAir for their good work, and our customers and partners for a good cooperation. Together, we are contributing to a healthier and safer society.
Christina Lindstedt, CEO, QleanAir
Solna August 10, 2022