Arjo : Interim Report January – September 2022

Interim report

January - September 2022

July-September 2022 in brief

• Net sales increased to SEK 2,519 M (2,247). Net sales rose organically by 0.3%.
• Adjusted EBITDA amounted to SEK 420 M (524).
• Adjusted operating profit amounted to SEK 147 M (280).
• Profit after financial items amounted to SEK 115 M (252).
• Earnings per share amounted to SEK 0.32 (0.69).
• Cash flow from operations amounted to SEK 280 M (390).
• The cash conversion was 67.7% (75.0).
• Changed outlook: Based on the current situation, organic net sales growth for the full year 2022 is expected to be around 0%.
• Arjo announces changes to the Arjo Management Team.
• Arjo presents updated financial targets for 2023-2025.

January-September 2022 in brief

• Net sales increased to SEK 7,293 M (6,614). Net sales rose organically by 0.6%.
• Adjusted EBITDA amounted to SEK 1,340 M (1,531).
• Adjusted operating profit amounted to SEK 549 M (815).
• Profit after financial items amounted to SEK 472 M (736).
• Earnings per share amounted to SEK 1.30 (2.03).
• Cash flow from operations amounted to SEK 464 M (1,095).
• The cash conversion was 35.1% (72.3).

Financial summary

	Quarter 3	Quarter 3	Jan-Sep	Jan-Sep	Rolling	Full-year
SEK M	2022	2021	2022	2021	12 months	2021
Net sales	2,519	2,247	7,293	6,614	9,749	9,070
Gross profit	1,023	1,033	3,110	3,080	4,239	4,209
Gross margin, %	40.6%	46.0%	42.6%	46.6%	43.5%	46.4%
Adjusted EBITA1)	217	349	756	1,022	1,123	1,390
Adjusted EBITA margin, %1)	8.6%	15.5%	10.4%	15.5%	11.5%	15.3%
Adjusted EBITDA1)	420	524	1,340	1,531	1,881	2,072
Adjusted EBITDA margin, %1)	16.7%	23.3%	18.4%	23.2%	19.3%	22.8%
Operating profit (EBIT)	140	276	529	798	809	1,077
Adjusted operating profit (EBIT) 1)	147	280	549	815	850	1,116
Profit after financial items	115	252	472	736	726	989
Net profit for the period	86	189	354	552	544	742
Number of shares, thousands	272,370	272,370	272,370	272,370	272,370	272,370
Earnings per share, SEK	0.32	0.69	1.30	2.03	2.00	2.72
Cash flow from operations	280	390	464	1,095	1,103	1,734
Cash conversion, %	67.7%	75.0%	35.1%	72.3%	59.9%	85.3%

1) Before exceptional items. See Alternative performance measures on page 17 and definitions on page 20.

At Arjo, we believe that empowering movement within healthcare environments is essential to quality care. Our products and solutions for patient transfers, hygiene, disinfection, diagnostics, treating leg ulcers, prevention of pressure injuries and deep vein thrombosis, and our medical beds are all designed to promote mobility, safety and dignity in all care situations. With over 6,500 people worldwide and 65 years caring for patients and healthcare professionals, we are committed to driving healthier outcomes for people facing mobility challenges. www.arjo.com

Solid underlying growth but challenges in the US

The Group grew organically by 0.3% in the quarter. Growth was held back by significantly lower critical care rental volumes in the US compared with the third quarter of 2021, and adjusted for this the Group grew organically by almost 5% in the quarter.

We continue to perform well in most major markets, such as France and Canada, with continued favorable demand and healthy growth. In the US, however, extensive healthcare staff shortages and an uncertain economic climate for healthcare providers have resulted in a slowdown in investments within capital goods, together with lower DVT sales and a slower implementation pace of awarded rental contracts.

Given the current uncertainty in the world, especially in the US, we are adjusting our outlook for the full year. Based on current information we estimate that organic net sales growth for the full-year 2022 will be around 0%.

Activities to strengthen long-term profitability

The gross margin was 40.6% in the quarter. An unfavorable product mix with lower volumes in critical care rental in the US and lower DVT sales held back the gross margin, as well as higher material and logistics costs compared to the year-earlier quarter. We were also impacted by inflationary effects related to salaries, energy and fuel. Both the high materials costs and inflationary effects are expected to continue in the coming quarters. The organization is continuing to manage the global challenges related to material supply and logistics with very high priority.

As part of strengthening the Group's profitability over time,

we continue the measures to adapt and enhance efficiency in the rental operations. A cost-savings program was initiated during the quarter with the purpose of improving efficiency within the critical care rental infrastructure in the US, which is expected to generate annual savings of approximately SEK 50 M starting at the end of the year. In addition, we are focusing intensely on continuing to gradually implement

price adjustments. As previously communicated, the effects of these adjustments are expected to have a greater impact from the fourth quarter onwards.

To meet demand and ensure the continuity of production and deliv- eries, inventory levels of standard components and finished products remain on a high level. The higher inventory levels are expected to be consumed in the quarters ahead, which is expected to contribute to continuing improvements in cash conversion. Overall, the Group's financial position remains solid.

Continued growth in the coming years

The need for healthcare globally continues to grow, despite short-term challenges in the world. Offering more people high-quality care using fewer resources has perhaps never been as important as it is now, which means that our long-term strategy is more relevant than ever.

The interest in solutions and technologies that can improve outcomes and increase efficiency within healthcare remains very high among our customers, and the SEM scanner roll-out is proceeding according to plan.

Today we present updated financial targets for 2023-2025. We expect healthy growth in the coming years and a continuing long-term improvement in profitability, although the challenges in the global business environment have pushed the profitability target forward in time and also added uncertainty in the short-term growth outlook.

To conclude, I would like to thank two of my colleagues in the Arjo Management Team: Mikael Persson, who is leaving the Group to take on new challenges, and Paul Lyon, who will retire at the end of the year after 40 years with the company. Christian Stentoft, our current Chief Strategy Officer, will succeed Paul as President Global Sales, and Jonas Cederhage, who joins us from Permobil, has been appointed Mikael's successor as new Executive Vice President, Product Development, Supply Chain & Opera- tions. Furthermore, we have strengthened Arjo's management with a new function led by Tobias Kramer, who has been appointed Executive Vice President, Global Marketing and member of the Arjo Management Team.

We operate in a market situation that is difficult predict, with challenges that are expected to remain in the quarters ahead. Despite

this, with a strong management team and a motivated and dedicated organization, I look forward to continuing to build a strong Arjo for the future.

Malmö, October 28

Joacim Lindoff President & CEO

INTERIM REPORT JANUARY - SEPTEMBER 2022    2

Group performance

Net sales and results

Third quarter of 2022

Net sales increased organically by 0.3% to SEK 2,519 M (2,247). Growth was held back by lower critical care rental volumes in the US as an effect of the Covid-19 pandemic now easing, and adjusted for this, growth increased by 4.9% organically.

Growth fell 8.8% organically in North America during the quarter, mainly due to lower volumes in critical care rental in the US. In addition, extensive shortages of healthcare staff in the US resulted in a slowdown in investments in capital goods, together with lower DVT sales and a slower pace of implementation of awarded rental contracts. The underlying business continued to perform well, with solid sales volumes within service and the more long-term segment of the rental opera- tions. Canada continued to perform well, reporting another quarter of double-digit growth.

Global Sales grew organically by 6.8%, with healthy demand in patient handling, hygiene, medical beds and rental. The UK, which is the Group's second largest market, performed well in the quarter, as did several other large markets, such as France, Germany and Australia.

The gross margin was 40.6% (46.0) in the quarter. The gross margin was held back by an unfavorable product mix with lower critical care rental in the US, lower DVT sales and higher material and logistics costs. In addition, rising inflation on salaries, energy and fuel impacted the margin. Efficiency improvements in rental and production, good cost control throughout the value chain and initial effects of price adjustments continued to contribute positively to the gross margin during the quarter.

The process of optimizing the rental operations is continuing and the Group initiated an efficiency program in the critical care rental operations in the US during the quarter. The purpose of the program is to generate a more efficient infrastructure and is expected to generate annual savings of approximately SEK 50 M starting from the end of 2022. The restructuring costs related to the program are expected to amount to approximately SEK 15 M, of which a minor portion was charged to the third quarter.

Operating expenses amounted to SEK 872 M (749) for the quarter. Adjusted EBITDA amounted to SEK 420 M (524). The adjusted

EBITDA margin was 16.7% (23.3).

Net financial items for the quarter amounted to SEK -25 M (-24). Positive currency effects in net financial items amounted to SEK 1 M (-2) for the quarter.

Translation effects on operating profit for the quarter amounted to SEK -2 M and transaction effects to SEK +31 M. In addition, the recognized revaluation effects of operating receivables and liabilities after hedging amounted to SEK -5 M net for the quarter.

January-September 2022

Net sales increased organically by 0.6% to SEK 7,293 M (6,614) for the period, with high demand in the underlying rental operations and service. Growth was held back by lower rental volumes of critical care solutions in the US and continued supply chain challenges.

Sales in North America fell 4.6% organically, mainly due to lower volumes in critical care rental in the US. Demand within long-term rental operations and service remained solid.

Global Sales grew 4.3% organically following a healthy sales development in several of region's major markets.

The gross margin was 42.6% (46.6) in the period. The lower gross margin was mainly attributable to lower critical care rental volumes in the US and higher costs for materials and transportation. Efficiency improvements made within rental operations and production, and initial effects of price adjustments, contributed to an overall positive effect on the gross margin during the period.

Operating expenses for the period amounted to SEK 2,528 M (2,252). Adjusted EBITDA for the period amounted to SEK 1,340 M (1,531). The

adjusted EBITDA margin was 18.4% (23.2).

Net financial items amounted to SEK -57 M (-62) for the period. Positive currency effects in net financial items amounted to SEK 19 M (7) for the period.

Net sales per segment,	Quarter 3	Quarter 3	Organic	Jan-Sep	Jan-Sep	Organic	Rolling 12	Full-year
SEK M	2022	2021	change	2022	2021	change	months	2021
Global Sales	1,445	1,273	6.8%	4,182	3,793	4.3%	5,600	5,211
North America	986	890	-8.8%	2,841	2,565	-4.6%	3,788	3,510
Other	88	84	-2.3%	270	256	-1.9%	360	350
Total	2,519	2,247	0.3%	7,293	6,614	0.6%	9,749	9,070

INTERIM REPORT JANUARY - SEPTEMBER 2022    3

Currency effect

	Quarter 3	Jan-Sep
SEK M	2022	2022
Translation effect (vs 2021)
Sales	+266	+639
Cost of goods sold	-192	-456
Gross profit	+74	+183
Operating expenses	-75	-180
Restructuring and other operating income/
expenses	-1	-1
Total translation effect, EBIT	-2	+2
Transaction effect (vs 2021)
Cost of goods sold	+31	+72
Recognized remeasurement effects
Other operating income/expenses	-5	-34

Cash flow and financial position

Cash flow from operations amounted to SEK 280 M (390) for the quarter. The lower cash flow was mainly due to lower earnings and a weaker trend in working capital. The continuing build-up of inventory contributed to the weaker trend in working capital. The Group's cash conversion for the quarter was 67.7% (75.0).

Net investments for the quarter amounted to SEK 204 M (156), divided between tangible assets of SEK 154 M (95) and intangible assets of SEK 50 M (61). The investments in tangible assets include investments in the rental fleet of SEK 122 M (74).

The Group's cash and cash equivalents amounted to SEK 736 M

1. and interest-bearing net debt was SEK 5,138 M (4,837). Arjo has contracted unutilized credit facilities of SEK 4,104 M (6,121) available for refinancing outstanding commercial paper. The equity/assets ratio amounted to 47.4% (45.2). Net debt/adjusted EBITDA was 2.7 (2.5).

Research and development

Arjo's gross research and development costs for the quarter amounted to SEK 57 M (48), of which SEK 30 M (20) was charged to operating profit. The gross costs correspond to 2.3% (2.1) of consolidated net sales.

Outlook for 2022 (updated)

Based on the current situation, organic net sales growth for the full year 2022 is expected to be around 0%.

Key events after the end of the quarter

Updated financial targets for 2023-2025

Arjo presents updated financial targets for 2023-2025.

• Organic sales growth of 3-5% annually
• Adjusted EBITDA margin of approximately 23% from full-year 2025
• Annual cash conversion of more than 80%

In addition, the aim is for the Group's dividend to correspond to

30-60% of net profit after tax.

Capital Markets Day on October 28, 2022

Arjo is holding a Capital Markets Day in connection with the publication of the interim report for the third quarter. The event will be held at EpiCenter in Stockholm starting at 8:30 CEST on October 28. The Capital Markets Day will be live streamed via the following link: twebcast.com/arjocmd. A recording and the presentations will be available on Arjo's website following the event.

Changes to Arjo Management Team

Jonas Cederhage has been appointed the new Executive Vice President, Product Development, Supply Chain & Operations. Jonas replaces Mikael Persson, who has decided to leave Arjo after nine years to seek new challenges outside the Group. Jonas most recently served as Executive Vice President Supply Chain & Head of Sustainability for the Swedish med- tech company Permobil. Jonas will begin his role on November 1, 2022.

Christian Stentoft has been appointed the new President of Global Sales, replacing Paul Lyon who will retire at year-end after more than 40 years with the company. Christian has worked as Chief Strategy Officer since Arjo was listed in 2017 and will take office on January 1, 2023.

Tobias Kramer has been appointed Executive Vice President Global Marketing, a new function in the Arjo Management Team that aims to further strengthen the Group's commercial agenda. Tobias joined Arjo in 2018 and most recently served as Vice President Portfolio & Category Management. Tobias started his new role on October 17, 2022.

Nomination Committee ahead of 2023 Annual General Meeting

In accordance with the resolution of Arjo's 2020 Annual General Meeting, the Nomination Committee in respect of the Annual General Meeting shall be composed of members appointed by the three largest shareholders in terms of voting rights, based on a list of owner-registered shareholders from Euroclear Sweden AB or other reliable ownership information, as of August 31 of each year, and the Chairman of the Board of Directors. In addition, if the Chairman of the Board, in consultation with the member appointed by the largest shareholder in terms of voting rights, deems it appropriate, it shall include an, in relation to the company and its major shareholders, independent representative of the minor shareholders as a member of the Nomination Committee.

Ahead of the 2023 Annual General Meeting, Arjo's Nomination Committee comprised Chairman Carl Bennet (Carl Bennet AB), Jannis Kitsakis (Fourth Swedish National Pension Fund), Marianne Nilsson (Swedbank Robur), as well as Board Chairman Johan Malmquist.

Shareholders who would like to submit proposals to Arjo's Nomination Committee ahead of the 2023 Annual General Meeting can contact the Nomination Committee by e-mail at [e-mail] or by mail: Arjo AB, Att:Nomination Committee, Hans Michelsensgatan 10, SE-211 20 Malmö, Sweden.

2023 Annual General Meeting

Arjo's Annual General Meeting will be held on April 20, 2023 in Malmö, Sweden. Shareholders wishing to have a matter addressed at the Annual General Meeting on April 20, 2023 can submit their proposal to Arjo's Board Chairman by e-mail: [e-mail], or by mail: Arjo AB, Att: Bolags­ stämmoärenden, Hans Michelsensgatan 10, SE-211 20 Malmö, Sweden. To ensure inclusion in the notice and thus in the Annual General Meeting's agenda, proposals must be received by the company by March 2, 2023.

INTERIM REPORT JANUARY - SEPTEMBER 2022    4

Other information

Risk management

Customers and healthcare reimbursement systems

A considerable share of Arjo's revenue is derived from sales of products to public sector entities. A political discussion taking place in certain countries concerns whether private healthcare providers should be able to offer publicly funded healthcare services. There is a risk that authorities in countries where Arjo operates will decide to limit or completely discontinue public funding of private healthcare, which could affect the establishment of new hospitals and other healthcare facilities and their purchasing of healthcare products, such as Arjo's emergency and long- term care products. Sales of the Group's products are also dependent on various reimbursement systems in each of Arjo's markets. In many of Arjo's markets (such as the US), it is often the patient's insurance company that - within the framework of the existing political reimbursement system - funds or subsidizes products for the patient's emergency or long-term care. Some of the success for sales of Arjo's products in these markets is dependent on whether Arjo's products have been approved for reimbursement under the various reimbursement systems. Since Arjo conducts operations in many different countries and markets, the above-named risks are limited for the Group as a whole. As part of Arjo's strategy, the Group is increasingly focusing on highlighting the clinical and financial benefits of the Group's products and solutions, something that further reduces the risks described above.

Research and development

Arjo's future growth is also dependent on the continued expansion of new product segments and new product types in existing product segments, which is dependent on the Group's ability to influence, predict, identify and respond to changing customer preferences and needs. Arjo invests in research and development in order to produce and launch new products, but there is no guarantee that any new products will achieve the same degree of success as in the past. Nor is there any certainty that Arjo will succeed in predicting or identifying trends in customer preferences and needs, or that Arjo will identify them earlier than its competitors. To maximize the return on research and development efforts, the Group has a highly structured selection and planning process to ensure that the Group prioritizes correctly when making decisions about potential projects. This process includes careful analyses of the market, technological progress, circularity, product life cycle, choice of production method and selection of subsuppliers. Development activities are conducted in a structured manner and the deliveries of every project undergo a number of fixed control points. Arjo is focused on products and solutions that will lead to more efficient care, in which more patients can be treated, which is expected to drive demand from end customers and therefore market growth. Product development that leads to a broader product range is a means for increasing organic growth in the market in which Arjo operates.

Product liability and damage claims

As a medical device supplier, Arjo, like other healthcare industry players, may sometimes be subject to claims related to product liability and other damage claims. Such claims could involve large financial amounts, result in significant legal expenses and negatively affect the company's reputation

and customer relationships. Arjo limits the risk of product liability and other damage claims related to its products and their use through the company's extensive quality and safety activities. A comprehensive insurance program is in place to cover any liability risks (including product liability) to which the Group is exposed.

Protecting and managing the infringement of intellectual property rights

Arjo invests significant financial amounts in research and development, and is continuously developing new products and technological solutions. To secure revenue from these investments, new products and technologies must be protected from unlawful use by competitors. If possible and appropriate, Arjo protects its intellectual property rights by registering patents, design and trademarks. The Group is also dependent upon know-how and trade secrets that cannot be protected under intellectual property law.

The Group has clear instructions on how to prevent, investigate and manage potential cases of infringement. In addition, procedures are in place to ensure efficient maintenance of the existing portfolio of rights.

Changes related to general economic and political conditions

Arjo operates in several parts of the world and, like other companies, is affected by general global economic, financial and political conditions. Demand for Arjo's medical devices and solutions is influenced by various factors, including general macroeconomic trends. Uncertainty about future economic prospects, including political concerns, could adversely

INTERIM REPORT JANUARY - SEPTEMBER 2022    5