"I am pleased that in Q3, we are back to an operating profit, EBIT, of over 15%. We have very good profitability in our underlying business and deliver a strong gross margin of 73.1% and an operating margin of 15.7%. An improvement of five percentage points compared to the previous quarter," CEO Christina Lindstedt remarks.
- 111 Net revenue MSEK
- 60% Recurring revenue
- 15.7% EBIT margin
July – September 2022 in summary
- Net revenue MSEK 111.4 (109.7), currency-adjusted net revenue amounted to MSEK 109.1
- Recurring revenue MSEK 67.2 (67.9)
- Order intake MSEK 92.2 (89.9)
- EBITDA MSEK 25.4 (32.2)
- EBITDA margin 22.8% (29.3%)
- Operating profit 2 (EBIT) MSEK 17.5 (24.8)
- Operating margin 15.7% (22.6%)
- Earnings per share SEK 0.71 (1.10)
- Cash flow from ongoing operations MSEK 11.4 (21.6)
Significant events in the third quarter
- QleanAir Wins MUSD 1.1 order from US healthcare organization for major cleanroom for large hom infusion center
- QleanAir supplies the German aerospace industry with air cleaning solutions
January – September 2022 in summary
- Net revenue MSEK 335.1 (332.5), currency-adjusted net revenue amounted to MSEK 328.6
- Recurring revenue MSEK 206.0 (196.8)
- Order intake MSEK 298.5 (283.4)
- EBITDA MSEK 69.4 (87.0)
- EBITDA margin 20.7% (26.2%)
- Operating profit2 (EBIT) MSEK 46.3 (65.5)
- Operating margin 13.8% (19.7%)
- Earnings per share SEK 2.15 (3.50)
- Cash flow from ongoing operations MSEK 20.2 (82.1)
Significant events after the end of the period
- QleanAir wins order for cell research cleanroom project from major US healthcare system, value USD 630,000
- QleanAir announces major order from the Swedish plastics industry, value 0.9 MSEK
- QleanAir wins cleanroom order for large private compounding company on the US West Coast, value just over USD 900,000
- QleanAir announces two major orders for Air Cleaners from the IT and telecom industry in Japan
A WORD FROM THE CEO
"I am pleased that in Q3, we are back to an operating profit, EBIT, of over 15%. We have very good profitability in our underlying business and deliver a strong gross margin of 73.1% and an operating margin of 15.7%. An improvement of five percentage points compared to the previous quarter. Net revenue was stable and amounted to MSEK 111.4, of which 60% was recurring revenue. The installed base grew by 7%, and we increased the volume of clean air delivered by 23%. The current uncertain global economic situation impacted our demand level in Europe. In our markets in Japan and the USA, we had a continued high activity level and strong order intake and were not affected to the same extent by the uncertain geopolitical and macroeconomic situation. Our business model is capital efficient, in addition our product, customer and geographical mix gives us stability in an unstable environment", Christina Lindstedt, CEO, remarks.
A strong quarter in Japan, APAC
Japan continues to be our single most important market. The activity level in the quarter was high, which resulted in a strong increase in order intake, of 56%, compared to the same period last year. The share of renewed contracts was also high. Sales for the quarter were in line with the previous year. Japan contributed very positively to QleanAir's profitability in the quarter, and to the increased sales of Cabin Solutions.
We continue our stated strategy to grow in Japan and add more products to our portfolio, develop our customer mix, increase our network of channel partners and our geographic coverage. In addition, we are increasing our sales of industrial air cleaning solutions, Air Cleaners, which open up another interesting customer segment for us in Japan. Also, after the closing of Q3 we have announced two larger Air Cleaner orders for our office segment in Japan. We see good opportunities for continued growth in the region, both in the short and long term.
Stable development in EMEA
In Europe, the comparison with Q3 2021 was affected by two large cleanroom orders. Apart from these, the development in order intake was relatively stable in Q3 compared to Q3 2021. Sales increased by 5% compared to the previous year.
We see that our work in Europe to scale up successful customer segments is yielding results and delivering growth. During the quarter, we communicated that we won a new significant deal within Cabin Solutions in Sweden. In Germany, we delivered important renewal deals within the automotive segment and also won new customers in the hotel, casino and restaurant industries. Within Air Cleaners, development was stable and on par with the previous year. We are continuing our strategy to scale up successful customer segments within Air Cleaners and Cabin Solutions. We are seeing that our investments into more sales resources in Europe are starting to pay off. Our cash flow was weighed down in the quarter by Clean Room project delays in Sweden.
High level of activity in the Americas
In the Americas, which is our smallest market in terms of revenue, we had a high level of activity in the quarter. This resulted in a strong increase in order intake compared to the previous year. Order intake increased sharply to SEK 18.2 million compared to SEK 5.6 million the previous year. In addition, we announced a major cleanroom order worth over USD 900' from a private compounding company after the end of the period. This is a result of our conscious strategy to broaden our customer mix. The increased level of activity is not yet visible in sales.
Net revenue in the Americas amounted to MSEK 6.6 for the quarter, which was just below the previous year. The focus in the US is on broadening our customer base and expanding our network of partners to generate more business. We look positively on our opportunities to deliver profitable growth in the US going forward.
A stable gross margin of 73.1 % and improved operating margin (EBIT) of 15.7%
We continue to have good profitability in the underlying business with a high proportion of recurring revenue and cost control. In the quarter, we saw 60% in recurring revenue, which is a strength and provides stability in an uncertain environment. We continued to implement price increases within certain parts of our offering, which contributed to a strong gross margin of 73.1%. We deliver a good level of profitability, with an operating margin, EBIT, of 15.7%. The improved margin is a result of a strong cost focus, in parallel with a continued focus on investments in growth through the adding of sales resources, sales-driving marketing and innovation. Compared to the second quarter, we increased the operating margin by over five percentage points.
The war in Ukraine and its impact on the global economy have resulted in continued high material prices and disruptions in global supply chains. Generally, the market situation involves greater uncertainty. However, 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. Our country mix resulted in a minor positive currency impact on the sales level but a negative impact regarding profitability.
Future outlook – prioritizing profitability
We continue to grow the installed base, which increased by 7 percent in the quarter. The quantity of clean air delivered increased by 23% compared to the previous year. 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. Globally, we have approximately 3,000 customers.
QleanAir has a strong focus on profitable growth. We are currently affected by uncertainties in the global economy, which to some extent results in longer and sometimes postponed investment decisions, especially among our customers in Europe. 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 longer term, we continue to see good opportunities for growth in all our geographies and product areas. Our high percentage of recurring revenue and our geographical mix help provide us with stability in the current uncertain global climate. We prioritize profitability and maintain a strong cost focus. Our goal is for all parts of our business to contribute positively to QleanAir's profitability.
Christina Lindstedt, CEO, QleanAir
Solna November 10, 2022