Physitrack reported a y/y organic growth of 5%, resulting in sales of EUR4.0m, which is 3pp below our estimate. Further, sales declined by 4% on a q/q basis. ARR grew by 13% y/y and amounted to EUR13.0m, representing a flat q/q growth and 2% above our estimate. Adjusted EBITDA reached cEUR0.9m in the quarter, corresponding to an EBITDA margin of 23% (26%), 2pp above our estimate. CAPEX amounted to cEUR0.9m, and adjusted EBITDA-CAPEX amounted to cEUR0.0m, which is 2pp above our estimate.

The softer Q2 topline performance primarily stems from the strategic shift away from one-time upfront revenue, which previously made up a significant portion of the Wellness business and occasionally accounted for up to 20% of Lifecare revenue. In addition, the localisation of Champion Health, especially in Sweden, has taken longer than expected, leading to a front-loaded cost base. However, CEO Henrik Molin remains optimistic, stating, “Despite the short-term challenges, I am confident that we will see a positive turnaround in the second half of 2024. We anticipate ending the year with positive cash flow and a return to margin expansion.”

Following Physitrack’s Q2 2024 report, we have trimmed the 2024e revenue growth forecast by 6pp and lowered the adjusted EBITDA margin by 3pp for the same period. These estimate revisions, along with the impact of a weaker EUR/SEK, are reflected in our updated fair value range of SEK9-SEK72 (SEK9-75), with a new base case of SEK 30 (35).