Careium AB (publ)

STO:CARE

Earnings Call Transcript 2024-Q2

[Mattias Vahlne]

Welcome to today's broadcast with Careium, they're going to present the results for the second quarter of 2024. Joining me in the studio, I have CEO, Christian Walen. And in the virtual studio, we have CFO, Mathias Carlsson. Welcome to both of you.

[Christian Walen, executive]

Thank you.

[Mathias Carlsson, executive]

Thank you.

[Mattias Vahlne]

So, Christian, to start off, what is your overall impression of the quarter?

[Christian Walen, executive]

Well, I think it's a stable and solid quarter. I think we are rightfully very proud of that due to, as I will discuss later, some slowdowns in some of our markets. And yet, I think we are delivering in a very consistent and positive -- on a consistent and positive trajectory going forward. So I'm very happy with what we have achieved. And of course, I would have wanted it to be more. But sadly, the market context is not always with you, but we hope to see a good development over time going forward.

And I'm particularly pleased about some of the innovation that we have released that I think is truly transformative in terms of our position in this niche market that we are in.

[Mattias Vahlne]

Okay. Thank you. And we are all eager to take a part of your presentation. So please go ahead.

[Christian Walen, executive]

All right. Thank you so much. So as stated, I am Christian Walen, CEO and President of Careium. My CFO, Mathias Carlsson, is with me here also, but I will be running the presentation.

So let's open up with the highlights for the second quarter of 2024. So first off, as stated, a solid, stable quarter, good development on the growth, good development on the profitability, something we are, of course, proud of, lots of hard work to get there. And this is actually in spite of some of these coolings of customer urgency seeing as both the U.K. and Sweden has imported new grace periods for certain parts of infrastructure and how long they are assumed to remain functional, analog infrastructure in the U.K. and 2G, 3G in Sweden.

Second, this quarter, late June saw a fantastic release. The resilient SIM, which is a bit nerdy maybe. But since you all know, connectivity is a huge part of how we deliver our services without the connectivity the likelihood of an individual being able to get the right kind of helps and the right signals and get the right data, of course, disappears.

So in that regard, the resilient SIM or rSIM, as it's affectionately known, is basically a new innovation in SIM chipsets, where instead of just having a single SIM that roams between different providers, we now have 2 provider profiles on the same SIM. And we've implemented everything in terms of all the adjacent systems and so on to accommodate this technology.

And the benefits of this are actually immense. Because what it does is that it allows an individual under the care of Careium devices and the services to feel as if he or she has a connectivity insurance. So should there be network disturbances or outages, as we see more and more in many of our markets as infrastructure becomes old, he or she is protected by the intelligence of the device that ensures that connectivity is there.

Second, what happens when an outage takes place is that our customers, say, a municipality or an insurance company, they are forced to activate their crisis plans because they don't know what is happening to -- maybe there are hundreds of thousands of people who are using the technology, and just the amount of saved effort and energy and resources, we believe, is something that is extremely beneficial to our customers.

And last but not least, I think also, as I said last quarter also, our continued focus on what we think are the high potential markets in Europe. That is Germany, Switzerland, Austria and also France, tremendous growth across the quarter. Really happy about that. So really, really positive.

And if we move to the sales and gross margin. We can see that we delivered SEK 229.4 million, I believe, in sales, which is a growth of 7.3% compared to the same quarter last year. So of course, we had a strong contribution from our other markets. However, they are also in the grand scheme of things, starting from lower levels. So we actually had a quarter where all our markets, say, for the U.K. that I will talk about later, delivered positively to the growth.

Service sales amounted to SEK 163.3 million, up from SEK 158.9 million in the same period last quarter -- last year, so an increase of 2.8%. Product sales amounted to SEK 66.1 million, up from SEK 54.9 million during Q2 in '23, which is an increase of 20.5%. And this is, of course, also reflective of our increased focus on getting our technology out there.

Gross margin, slightly lower, came in at 41.7% in the quarter versus 42.2% in the last quarter. And the main impacting factor here is, of course, the higher freight costs due to the Suez Canal situation and also, of course, to some extent, dependent on the product mix in the month and the quarter.

So with that, we head to our markets. And first off, in the Nordics, we saw our business steadily growing at 7.7%. Several new contracts contributed to this being implemented. So services sales rose 4.8% compared to the same period last year. Of particular note, I think, is that product sales in Norway, which is traditionally a service market, actually grew 50.1% in the quarter, which is something that I think is quite impressive.

The slight decrease in gross margin was caused by a shift in product and customer mix, coupled with some of these gross margin pressures already mentioned. Now on the U.K., as a reader of the report, you would probably think, "Oh, this is not looking so good." However, we are almost used to it. The U.K. struggles immensely with the fact that they have a tremendous amount, maybe 60, 55, nobody really knows, amount of all hundreds of thousand users on analog equipment.

And what this means with the infrastructure failings is that the U.K. simply cannot close down without having proper transition of all these installed units and devices. That would put people at too much of a risk. And thus, the government had decided to extend this grace period, as you know, extended already in the first quarter with additional year and now for 1 more year as well.

And what happens here for us is that there is usually an immediate cooling act when something like this is announced. And then over time, we can see service sales and product sales kind of going back to more normalized levels. What we can note here is that in the fourth quarter of '23 and the majority of the first quarter, we actually saw much, much larger decreases in the product sales in the U.K.

However, for this period now, where the information came out so early that impacted most of the quarter, we're actually not seeing the same detrimental effect. So we're pretty happy about that, and it seems that the customers have realized that while you might be given an additional year, you still need to transition a lot of service and product users. So in that regard, we remain quite confident that over time, this will actually adjust to a more normalized level.

Gross margin slightly increased in the U.K., not by much. And going to the Netherlands, we saw sales increase by 14% compared to the second quarter of 2023. The sales increase is both price increases and additional contracts and end users, which is great. Gross margin was at 55.1%, which might look a little bit low since same period last year was 60.7%. But this is mainly related, as we communicated also throughout 2023, that we had some particular customer-related projects ongoing that are no longer something we deliver on.

And last but not least, for the markets, and we call other markets. This is the Spains, the Germanys, the Frances out there, Germany among them. We saw sales increase by 180.4% compared to the second quarter of 2023. Now why?

Well, we are making a lot of effort in getting more commercial excellence, i.e., really good people who are driving our sales. But we are also investing a lot in our resource allocation into really meeting the needs of the customers in these markets because it's slightly different all over Europe, and this is the payoff that we're seeing. Now the quarter here was obviously extraordinary. We do foresee this being at the very high level going forward, possibly not at 180% growth, but still very strong.

As you might recall, in the first quarter, it was around 80%, if I'm not mistaken. So gross margin, a little bit affected by the steering of the product mix and the freights that already been mentioned. And with that, we turn to profitability, which I think is a very good standout in the report here.

So we can see EBITDA amounted to a stable SEK 37.6 million, up from SEK 33 million in the same period last year. This corresponds to an EBITDA margin of 16.4%, where it was set at 15.4% in the past year. EBIT amounted to SEK 21.8 million, up from SEK 14.6 million, corresponding to an EBIT margin of 9.5%, which is quite dominantly increased from last year, where it sat at 6.8%. And this is, of course, in part driven by an increase in sales and the good growth we've been having, but also due to our continuous work on efficiency and becoming a better business.

And with that, we move to cash flow. So cash flow from the current activities in the second quarter of 2024 amounted to SEK 14 million, down from SEK 18.5 million in the same period of last year. The free cash flow amounted to SEK 0.5 million, down from SEK 7.7 million in the same period of last year. And the working tie-up in the quarter was about SEK 21.2 million, vastly increased from the SEK 3.1 million in the same period last year.

Now why? Well, as we have mentioned, with this slowdown in the customer urgency to bring products and services on board, we, of course, need to plan for this in advance. And it's very hard to plan for an extension of a grace period, like I mentioned earlier.

If you add to that the fact that we have a very long lead time from production to when we actually stock and warehouse something, our forecasts are running, of course, on a rolling basis, but still it's quite a long time, which has actually been increased due to the issues with the Suez Canal since we prefer to use sea freight to keep costs down and also from a sustainability perspective.

So in that regard, this is mainly attributable to an inventory buildup based on the forecasting and the growth we were expected. We're not too worried about it going forward, given that we do see quite a big demand for our products and services.

Cash totaled SEK 34.8 million, down from SEK 53.7 million at the end of the second quarter in '23. In addition, the bank overdraft facility that we have showed available cash of SEK 32.9 million, which was set at SEK 35.2 million in the same period last year.

Net debt amounted to SEK 183.2 million at the end of the quarter, down from SEK 216.8 million during the same period last year. So if we move into the concluding remarks, I think we are very positive about having a stable performance despite these challenges to sales. We do not foresee this being a major drag but rather something that will normalize over time.

We are extremely proud of launching the resilient SIM and integrating it in our entire Eliza family of products as the first step, which is our fixed alarms, that most commonly used alarms that are in people's homes. What's also a bit interesting here is that, as you might have read in our first quarter, we actually have 100,000 Eliza family units deployed across Europe, which means that this also represents an opportunity to go back to all these markets that are challenged on infrastructure changes and offer customers the opportunity following a physical swap-out, of course, to install this new technology since it's 100% backwards compatible. So that's also very interesting for aftermarket sales.

And last but not least, I want to underline how proud we are of seeing the other market segment moving so well. In terms of challenges, well, I mentioned the freights already. It's not just that the shipping companies are playing it really smart in terms of the costs, but it's also the delay which, of course, has more of an impact on the forecasting, which is, to us, maybe more annoying than the actual cost increase because it has more of an impact, in our view, to lose 30 days on the forecasting and planning. So additional delays also, as mentioned, we are not too worried about it.

But we are likely to see is that the expected peaks are probably leveling out, kept at a higher level for longer. And you have a bit of an initial reaction from the market where as an anecdotal example in Sweden, one of the largest contracts that we know that will be out to tender, and were supposed to come after summer as soon as it was announced that they're basically okay for another year.

They call this up 3 days later and said, is it possible to just delay this? We're thinking about. What do you think? And we said, well, you are taking on an additional amount of risk by doing so. It's, of course, your choice. Sooner rather than late, you will have to go digital because you're losing out on a lot of value and security. But at the end of the day, it's your choice.

So we just need to be a bit patient and to keep being as good as we are, and we're fairly convinced that this will turn out favorably. And for the priorities, of course, this is maximizing the value of these great innovations that we've taken to the market.

It's the mobile social alarm, Abby, that we're seeing great results on predominantly in France, where it's really taking off, and also the resilient SIM released late June. So we haven't had that much time, of course, lots of marketing campaigns are rolling and so on. So this is going to be really interesting.

And we have a couple of other things that are coming in the second half of the year that we are really, really excited about. And last but not least, as some people have mentioned, the U.K., we've been in this transition where we have exited a lot of contracts, and now we are really going to try and put the pedal to the metal, so to speak, on getting a positive end user growth.

We have cleared out the majority of the perhaps not so good contracts in the portfolio, and it's time to get back up on the winning horse and actually having a net positive rather than a net negative even if all the other financial performance measures are looking in a good direction.

And I actually think also, correct me if I'm wrong, Mathias, that service sales in the U.K. were actually better quarter-on-quarter in the second quarter also.

[Mathias Carlsson, executive]

A small increase.

[Christian Walen, executive]

A small increase, exactly. And given this, where we now look at the sort of halfway mark for the first half of the year and we see that our growth is about 80%, our EBIT has improved by some 86%. We retain our guidance for the full year. We do feel that this innovation and the impact of this slowdowns or cooling periods it will gradually decrease, and we look to do a pretty good second half of the year.

And I think that predominantly, the fourth quarter is likely to be very strong for us. And with that, we conclude the presentation and open up to questions.

[Mattias Vahlne]

Thank you so much, Christian. Very inspiring to hear. And I'll start off the Q&A by asking, well, you keep a steady growth in Q2, pretty much in line with the pace that you have in Q1. Is this in line with your expectations?

[Christian Walen, executive]

Well, no, it's clearly lower. I think we've definitely felt the impact of the customer reactions to these changes. And the market it's hitting. It's the U.K. and the Swedish one, which coincidedly are our 2 biggest ones. So we are, of course, a bit frustrated.

You always want to do better. But here is a challenge that is quite hard to get around. So we just need to be patient, keep doing the same good work we're doing. And hopefully, we will see this reverse over time.

[Mattias Vahlne]

Yes. And with that, I will unleash equity analyst, Oscar Ronnkvist of ABG Sundal Collier. Please go ahead with your questions.

[Oscar Ronnkvist, analyst]

So I think I can just begin with the Italy shutdown and then also the 2G shutdown postponement in terms of organic growth. Do you feel like -- I mean, sort of underlying feels like it was accelerating the organic growth even with, we have 1 percentage point decline from Q1. But I don't know if you could quantify anything on the shutdowns? Do you feel like the underlying growth is accelerating or is it still a little bit underwater if you exclude those impacts?

[Christian Walen, executive]

I think it's a bit of a timing issue because there's a little bit of a psychological effect, like I mentioned on the anecdote there with the large customer in Sweden. So when our customers who are, and I think we have to be honest with this, many of them are, of course, quite cost conscious.

So when they are given the opportunity to postpone investment for a year or smear it over a longer period of time, they tend to go for that. And of course, we can do our part in making a good as an opportunity as can be made out of that, but it does have a bit of an impact.

So I think it's more important to gauge this over some more time. I don't know if you remember, Oscar, but we communicated in the fourth quarter regarding the U.K. that we saw a substantial decrease in product-related sales following the initial announcement that was without a deadline, a new deadline. It was just a vague kind of we're going to postpone.

As soon as the deadline was set, which was 1 additional year, sales normalized, which was in March with January and February being impacted in the same way. Now that only lasted for some 30 days, and then they again concluded that they would have to add 1 more year on to that. And this is now the effect that we've been seeing.

So in summary, I'd argue that the decrease is a lot lower than it was following the initial announcements. So given that, I think it's a little bit of the market settling into it. it doesn't change the fact that you have hundreds upon hundreds of thousands individuals out there, for example, in the U.K. that need to be addressed because they will not be able to have this security and safety should someone actually pull the plug. So in that regard, I think it's more of a little bit of being patient.

[Oscar Ronnkvist, analyst]

Perfect. I guess that closer to the actual shutdown, you'll have an increased demand. But can we say that it has normalized a little bit after the sort of first impact if you look at, I don't know, how the first few weeks have developed in July and also sort of how the quarter ended?

[Christian Walen, executive]

Yes, I think that's fair to say. I mean, we also had a lot of our customers involved in the testing of the resilient SIM because we do things with a strong focus on quality. And that, of course, could also have had a little bit of an effect in that. You knew that something new was coming you were invited to the party and to make sure that the technology truly was great, as great as advertised. And that could also have a partial effect.

I'm hesitant to make any excuses, but we have seen a sort of positive uptick here at the start of the month, but it's still way too early.

[Oscar Ronnkvist, analyst]

Got it. And just in the Nordics, I think you mentioned that Norway grew around 50%. Any particular reason behind the accelerated growth? Or we haven't really seen the growth numbers before that. I guess, looking at the total.

[Christian Walen, executive]

No it was -- yes. And we -- as you know, we disclosed the Nordics as one business unit, so to speak, but we just wanted to highlight something really positive coming out of Norway. And in this particular case, it was related to a large region of Norway choosing Careium for a lot of their product needs in the quarter.

[Oscar Ronnkvist, analyst]

And how recurring is that if we could sort of extrapolate that into something?

[Christian Walen, executive]

Well, I think it will definitely improve the Norwegian outcomes going forward. But I mean, we do a lot of things in Norway. So this was more of a really interesting kind of indication seeing as the Nordic market is more of a service market in the sense that you, as a customer, you source the hardware, the installation, the monitoring, the digital services, all in one package on a recurring basis. So we don't usually see those sharp spikes in product-related contracts.

So it was more of a positive indication that the Nordics are serious about technology-enabled care.

[Oscar Ronnkvist, analyst]

I see. Perfect. Just on the other region, which saw obviously a very healthy growth of 180%. But we've also seen a sequential, ramp-up for quite a while now. So -- and you say that you make a lot of efforts here. So both just -- do you feel like you are fully prepared now on the R&D side to attract more growth in this market or do you think that you need to see sort of accelerated investments to be fully prepared here or are you thinking of any sort of M&A opportunities where you can maybe accelerate into these markets?

[Christian Walen, executive]

Well, I'd rather strengthen our already excellent R&D organization than pursue M&A opportunities related to technology. Because while there are niche players who are really narrow in their approach and technology that might be doing a great job out there, I do feel that we are the #1 sort of quality and innovation leader in our industry.

And I'm not so sure that M&A is really the catalyst to retain that position. I think we can do a whole lot more ourselves. And our M&A should probably be focused on other angles, so to speak. So I'd rather see a bit more of an investment into R&D to be able to sustain and create similar good trajectories in other markets.

[Oscar Ronnkvist, analyst]

Got it. Just had one question on the guidance. Reckon that you reiterate your full year guidance for 12% to 15% organic growth. Just on the EBIT guidance, I think you've made a little bit more than SEK 40 million in EBIT in H1 compared to, I think it was SEK 60 million in the full 2023. So just if you could help us a little bit on the margin side.

I think you started off with a little bit more than 9% of EBIT margin in H1. Do you think that's a sustainable level? Or do you expect OpEx to ramp up or the gross margin to come down or anything that could hurt the margin in H2?

[Christian Walen, executive]

Well, the only guidance we have is that we will do better. So I won't comment so much more on that. But I think we have the opportunity to be a very profitable company. But do we want to take the foot of the gas, so to speak, in investing to create an even stronger future? No.

I still think we have a lot more to do, and it would be unwise of us to go for a sort of profitability play at this stage. We still have so much growth opportunities more or less in all of our markets. So I would be hesitant. I'd rather see us increase our journey to becoming an even more technology-centric company, and I think we're well on the way of that.

And it would be really interesting to face the second half of the year to see even more of these innovations hitting the market.

[Oscar Ronnkvist, analyst]

I see. And just can we interpret that as you will accelerate R&D rather than accelerating sales and marketing or should we see it as a sort of a balanced mix between the two?

[Christian Walen, executive]

Well, I mean, for some of our markets, it would probably not be so beneficial to increase the commercial organizations. They are probably quite rightsized to where we currently are. Should we grow and get additional technologies or what have you, then it might make sense.

But I would probably invest a bit more in R&D, yes, going forward. If you recall also, when we were in our troubled times in 2022, of course, marketing, R&D, those are the kind of areas that you examine really harshly to see if you can make savings and so on. And I get it's a pretty normal kind of bounce back to say, well, we're on a good trajectory.

We're doing well. We're highly appreciated by customers and our users alike, providing a lot of value and enabling lives in a way that few others can do. So let's do more of that because we are clearly being rewarded for doing so with our growth rate and the corresponding profitability.

[Oscar Ronnkvist, analyst]

Perfect. I think I'll do, I just want to do one question on the cash flow in terms of timing. So pretty negative working capital tie-up here in Q2. But how much of that was sort of surprising for you? Just -- I mean some of the -- obviously, with regards to the market headwind, so to say, in the U.K. and Sweden and also, as I think you alluded to, the freight both the freight rates or the freights timing. So do you expect any sort of normalization in H2 in terms of working capital or is it too early to say anything?

[Christian Walen, executive]

Mathias, you've been so silent for such a long time. Why don't you step in here?

[Mathias Carlsson, executive]

I would say that it was a bit surprising that the tie-ups would come. So that will be such a big tie-up in Q2. And that was, as we have explained regarding, yes, the deliveries out of the inventory were less than we planned for. I think that if no new surprises arise, I don't think we will have the same problem in the second half of the year. But yes, you never know, but I'm positive on the cash flow side for the rest of the year.

[Christian Walen, executive]

Yes. And I think an important part is also that, I mean, obviously, we don't disclose this. But if we look at what is in the inventory, it is the type of devices and technologies that we assumed would drive a greater level of growth. So the demand for those who are still out there.

We are actually Mathias, I think, very positive about our overall inventory situation because the majority of all legacy inventories and agreements to produce and so on, we have shifted those out quite efficiently. So it's the right type of things.

[Mathias Carlsson, executive]

Yes. It's not in all things that we [indiscernible].

[Christian Walen, executive]

No, no, no, no.

[Mathias Carlsson, executive]

It has been buffering up a bit more than we planned due to the slowdown a bit on deliveries. But those are -- that means that we are well prepared for selling a lot in the coming months.

[Christian Walen, executive]

Yes.

[Oscar Ronnkvist, analyst]

All right. Good to hear. I think that was most of it from my side.

[Christian Walen, executive]

Thank you, Oscar.

[Mattias Vahlne]

Thank you, Oscar. And if you want to ask more questions, you can raise your hand. I'll let you in again. I will also be raising some questions from the viewers as we move on.

But first, you've been covering a lot about the market. So I will ask when it comes to -- when will we see more from other, other markets?

[Christian Walen, executive]

Oh. That's a very good question. Well, as I think I've stated a couple of times, we've done a pretty extensive sort of strategy review during last year. And what we include is that we are with physical presence where 85% of European spend in our industry is happening.

And given that, we are not so sure that it's in our best interest to actively pursue the Czech Republic or Greece or what have you in our sort of European environment, we are probably better served doubling down on places we are in.

Now the big question that you have to think about is, of course, the U.S. But I think as everyone knows, it's very hard for a Scandinavian European company to make it there. but it's something to keep on our radar. It's by far the biggest single market, it has the most attractive margin profile and so on.

But it's not something that we would be doing in an easy manner. It's really tough as many companies have learnt. And I think we are probably better in focusing a little bit more on getting ourselves exactly where we want to be in Europe before we start entertaining those thoughts.

[Mattias Vahlne]

Thank you. And if I move back to other markets, we have a question here saying if you could give you some example of what kind of customers do you sell to in other markets? Is there a difference?

[Christian Walen, executive]

No, that's a really good question. So we talk a lot about in the Nordics, for example, about the municipalities and the public side. In those other markets, the Frances, the Germanys and so on, it is completely different. It's a B2B game. So it follows all the traditional kind of aspect of enterprise sales or large-scale business-to-business engagements.

And of course, what we want to do is partner with the winners in those respective markets. This is also one of the reasons for why we are not running alarm receiving center operations in these markets because our customers do, and we don't intend to compete with them. We'd rather want to supply them with the hardware and the software that enables them to do a great job for their seniors under their care. So it's a completely different way of working, and we're very happy that we have these different segments.

And if you think about the sort of market logic or business logic of why are we in business-to-public, business-to-business and even private pay. I mean, we have around 20,000 customers who are there on their own, volition so to speak, that we service directly. It's actually not that strange because in the business to public segment, we have the huge volumes, perhaps the average price per connection, so to speak, is not so great, but there is stability. It's multiyear. It's what allows you to build a very, very solid base of your business.

In the B2B segment, you have perhaps more of an orientation towards hardware and software, but it does include services also. And you have slightly better margins, but the volumes are, of course, not as big, and you have shorter time spans for the contracts.

And last but not least, you have the consumer side, which I think we haven't talked so much about. Hopefully, something we'll have opportunity to check with in a different way, where you have, by far, the best margin profile, some customer acquisition costs, of course, but it's, of course, the smallest, most high-value segment. But that's also where you have the most opportunities for upselling and adding more value to the end users and so on.

So that's sort of the logic of why we are in all of these 3, and it's a bit dependent on market. In U.K., you gain a lot from playing in all of these 3. In Norway, well, you're probably best sticking predominantly with the public side.

[Mattias Vahlne]

Okay. And if we move to product, I think we all realized how important rSIM is for you. But if we look on a longer time period, what is your development, product pipeline look like?

[Christian Walen, executive]

Since we haven't communicated so much about it, I won't go into much detail. But I would rather say that I think myself, the management team and the entire organization are really, really excited about the things in development, the things we are doing and how they will allow us to service all types of customers better and also service ourselves because there's a lot of innovation since we do end-to-end, that if we do it really well, it is likely that it's extremely valuable to our customers also. So I'm not going to comment so much on it. It would be a topic for another day, but I can just assure all the participants in the audience that we are very much hard at work at creating our future.

[Mattias Vahlne]

Another question regarding the problems, what you just said, about the supply chain. How do you see at the risk having the whole production line in Asia?

[Christian Walen, executive]

It's an extremely good question. We are, of course, like everyone, looking at options since no one really knows where the geopolitical winds are blowing.

What I would say, though, it's not as easy as just saying that Asian manufacturing is cheap. That's, of course, part of the story, but it's also extremely competent. So when you visit our production partners that we've had for almost 20 years, it's like entering us with watch manufacturing facility. Everything is super clean. It is extremely high tech.

So they are also highly efficient. And I think one of our problems is actually that we are probably a little bit too low volume for Asian production since they're so used to doing so much. But thankfully, we have these long-term partners who really work in great ways together with us. And I think it's not as simple as just moving out due to you can pay slightly more and feel slightly more safe. It's also a lot of competence in the Asian markets for production. They're really good at it.

And I mean, what is it? It comes 100,000 engineers coming out of China every year, something like that. That's not bad. So while this is an ongoing discussion and certainly a very important one, we read the papers like everyone, and it's in the back of our minds. But it is something to evaluate rather than something to knee-jerk kind of act on.

[Mattias Vahlne]

Right. We have received a question regarding to the financials. When will you repay the hybrid loan?

[Christian Walen, executive]

So I'll comment a little bit on that. So the hybrid loan, for those that don't know about it, it is something that was set when the split was made out of Doro and Careium was separately listed. And if I'm not completely misinformed, the -- and you will have to help me here, Mathias, the legal aspects of how Doro was a capitalized Careium, put a limit on how much they could do. And thus, the hybrid loan was put in place as a way of capitalizing the business moving sort of slightly around that, of course, deemed by the legal teams at I think [ Vine ] and PwC as the auditor as a perfectly viable way of doing it.

Now the hybrid loan to us saying is that part of the equity, of course, it's, of course, very beneficial. So I'm going to quote a former large-scale investor who was the former CFO of a big bank. He said, "I would be very interested to understand how the Board would communicate that this hybrid loan would take precedent and be more senior to the other forms of debt financing the company." So I'll leave it at that.

[Mattias Vahlne]

All right. That was a very good answer. And there was a transaction announced today within your sector. It's Nordic Capital acquires Norwegian Peer Sensio. What's your comments to this?

[Christian Walen, executive]

I think it's absolutely fantastic that institutions of the renown and reputation that Nordic Capital has are finally opening their eyes to this sector. I mean, this is -- you can't get much more future-proof. You can't get much more technology-orientated, then you need to be, to be really successful in this amazingly area that we are working in.

And what I will say, though, knowing Sensio, of course, as a company that we collaborate with, and we do a lot of things together since we are not exactly overlapping and competing, we're like very good neighbors. I think if you dig down into how Sensio was constructed following a lot of M&A and a lot of focus on certain key areas, I think the important part that I take with me is obviously that I genuinely feel that Careium is undervalued. I'll put it like that.

[Mattias Vahlne]

Okay. And I don't have any more questions, and I cannot see a raised hand from the equity analysts. So I hereby thank you so much, Christian and Mathias, for your presentation and all your answers.

[Christian Walen, executive]

Thank you so much. Pleasure to be here.