Hello, and welcome to the Karnov Group Audiocast Press Conference 2021. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. Today, I'm pleased to present CEO Pontus Bodelsson and CFO Dora Brink Clausen. Please begin your meeting. Good morning. Welcome to today's call, and thank you for being here. My name is Pontus Bodelsson, and I am the CEO of Karnov Group. With me on the call, I also have the company's CFO, Dora Brink Clausen. Today, Karnov Group announced that we've signed a binding offer to acquire carved-out legal information-based businesses of both Thomson Reuters in Spain and Wolters Kluwer in Spain and France. This is a great opportunity for us, and this presentation aims to present the background and the rationale for the intended transaction, how it affects Karnov Group, and answer your questions related to this transaction. Next slide, please. First of all, we would like to remind you of Karnov Group's core values, such as our mission, our customer promise, and strategic goals. Our mission is to strengthen the foundation for justice and society and helping professionals in making better decisions faster. Our promise to our customers is to become an indispensable partner for all legal, tax, and accounting professionals. We strive to set the standards for how practitioners access the law and manage their practices more efficiently. Our strategic goal is to deliver the highest quality of content, provide a state-of-the-art user experience, and support workflow. This is why Karnov Group has now taken the decision to accelerate our expansion beyond the Nordics and has entered into a binding offer to acquire legal and regulatory information-based businesses of Thomson Reuters in Spain and Wolters Kluwer in Spain and France. The intended acquisition is a growth opportunity for Karnov Group that we haven't been able to see in the Nordics. When we acquired Norstedts Juridik in 2018, we generated solid growth. Through the successful integration, we enhanced our offering, which resulted in organic growth in Sweden and Denmark. Building on this experience, we are encouraged to continue to grow in other geographical markets. Through this proposed transaction, we would enter two interesting markets and establish a relevant footprint in Southern Europe. Now to more details about the contemplated transaction. Next slide, please. What we intend to acquire in one transaction is the carved-out legal information-based businesses of both Thomson Reuters in Spain and Wolters Kluwer in Spain and France. The businesses entail a total of six brands, some of the best-known brands within the segments of legal information services, including legal information reference, workflow and analytics, and training spaces in Spain and France. Building on the best from the entities and leverage on best practice, Karnov can create a strengthened customer offering and create the basis for value creation within the combined entities and significantly expand our addressable markets. I will revert back to this during the course of this presentation. Karnov will be well-positioned to realize cost efficiencies, opportunities in Spain of approximately EUR 10 million on an EBITDA level with a full effect in 5 years. The proposed consideration corresponds to an enterprise value on a cash and debt-free basis of EUR 160 million, equivalent to an acquisition multiple of approximately 9.6x, excluding the in-market efficiencies just mentioned. Next slide, please. The intended transaction will be financed through a combination of debt and equity, where the debt will be facilitated through a new bridge loan facility of EUR 160 million secured through Nordea, and the equity will be raised through an issue of new shares. As a result of this proposed transaction, we will temporarily exceed our leverage target of 3.0x adjusted EBITDA. Dora will revert to the financial details of the contemplated transaction later in this presentation. Next slide, please. Now we would like to further elaborate on the strategic value of this intended transaction as it will transform Karnov Group from one of the leaders in the Nordic markets to a European player with relevant market presence in Spain and France. These are the key attractions in brief. First, this is a unique and attractive opportunity to significantly increase the total addressable markets while also providing a strong platform for further international expansion. By building on the best from Wolters Kluwer and Thomson Reuters and leverage on best practice, we can create a strengthened customer offering and create the basis for value creation within the combined entities. We have done it before with Norstedts Juridik, and we are encouraged to do this again, building on our track record. Let us look closer at each one of these arguments. Next slide, please. Through this potential acquisition, we expect to increase our addressable market from approximately 2.0 billion SEK that we have today to approximately 17.3 billion SEK. This is an increase of around 9 times. We are planning to nurture this possibility through combining the three entities and to form a strong player in Spain and France, creating a solid combined platform for continued expansion and consolidation in the Southern European region. Our strategy for further expansion in the region entails both expanding the core products into new markets and adding adjacent verticals to the current product portfolio. This is a great opportunity for us to enter new, highly competitive regions through very well-established players. We are fully committed to working on integration and integrating those entities into one solid platform. We also find that this potential acquisition enables us to accelerate our growth journey outside of the Nordic and that it lays the foundation for similar attractive acquisitions also in the future. Next slide, please. We believe that the combination of a strong platform and content from Thomson Reuters in Spain and Wolters Kluwer in Spain and France, together with Karnov Group's track record from value-creating acquisitions, would enable a best-in-class platform and a solid foundation for strengthened customer offering and increased customer value. By adding well-known local brands and leveraging on best practices, Karnov will be well-positioned to reach new customer groups in Spain and France. Again, we have done this before. Through the acquisition of Norstedts Juridik in 2018, we successfully strengthened our market presence in Sweden and Denmark, enhanced the customer offering, and subsequently established a platform for organic growth. Since the IPO in 2019, we've carried out several acquisitions to expand geographically as well as in adjacent categories. The latest markets we have expanded include Norway through Strawberry Law and DIBkunnskap in 2020 and France and the Netherlands through Echoline in 2021. Next slide, please. Just like we created a solid platform in the Nordics, we now intend to create a relevant platform in Southern Europe as we see an opportunity to create a basis for value creation within these entities. We expect the potentially acquired entities to generate cost efficiencies mainly derived in Spain. That includes central functions, a harmonization of IT and content platforms for unified offer, as well as efficiencies within administration. The fully phased run rate cost efficiencies on an EBITDA level are expected to approximately EUR 10 million, and we expect them to have full effect in 2026. Costs of achieving these are expected to approximately EUR 24 million. Important to note here is that we expect limited integration risk for Karnov Group as the three entities will be separate from Karnov’s current platform. Next slide, please. Finally, to conclude our key rationale for the contemplated transaction, we find that it would bring significant value to our shareholders. These three companies are similar to us in terms of having strong brands, high recurring revenues, and attractive customer portfolios. We believe that the transaction consideration has an attractive multiple of 9.6x EBITDA, excluding one-time cost efficiencies. Given our future potential to combine these three companies, we consider the acquisition to be significantly EPS accretive. We are happy to be in the position where we have the possibility to add three strong potential entities and six strong brands to our portfolio. Let us now go through them in the next slides. Next slide, please. Wolters Kluwer Spain is a major Spanish player that has historically operated under the brand LA LEY. It is a historical pioneer with a best-in-class platform within online legal information services in Spain with a strong content and enrichment platform called Altamira Naw. Altamira is a proprietary CMS and publishing platform. The company reported revenues of EUR 30.2 million, whereof 86% recurring and an EBITDA margin of 17.6% for the full year of 2020. Next slide, please. Thomson Reuters Spain operates under the Aranzadi brand, a well-known industry brand in the Spanish market with an attractive product portfolio. Thomson Reuters Spain has major Spanish coverage across information and reference and workflow. The company reported revenues of EUR 38.6 million, whereof 76% recurring and an EBITDA margin of 8.9% for the full year of 2020. Next slide, please. Echoline is a key French player with deep sector specialization that brings together some of the most established legal information service brands in the French legal market, including Lamy Liaisons. The company reported revenues of EUR 30.2 million, whereof 89% recurring, and an EBITDA margin of 14.4% for the full year of 2020. All in all, we aim to develop a strong Southern European player with approximately 1,000 FTEs in Spain and France that has an attractive revenue profile with high recurring revenues and a strong product portfolio. Building on the best from these three entities, we believe that we can bring significant customer value going forward. Next slide, please. As said, our proposed transaction would create a strong player in Spain and France with pro forma revenues of approximately EUR 123.9 million, combined with an EBITDA of approximately EUR 17.1 million for the financial year of 2020. The combined entity will have an attractive revenue profile with approximately 84% of revenues recurring. As we aim to increase the share of digital sales, we expect this number to increase over time. Further, just like Karnov, the combined entities have a very high net retention rate. Important to note is that as a result from the planned cost efficiencies, we expect that there are post-merger integration initiatives which generate margin improvement within the combined platform. I now hand over to Dora to go through the financials of the contemplated transaction. Next slide. Thank you. On to the financials. First, our numbers are preliminary and unaudited. The contemplated transaction would give combined revenues to Karnov of almost SEK 1 billion, with an adjusted EBITDA margin of 30% for the first half of 2021. As you can see, our revenues are expected to increase significantly. Hence, our base of recurring revenue would follow the same direction. Given that we are able to complete the proposed transaction, our leverage will increase in the short and medium term. In terms of leverage, our financial target stipulates that our leverage shall be no more than 3x, but that this level can temporarily be exceeded, for example, as a result of acquisitions. In the contemplated transaction, if the contemplated transaction is executed, Karnov's leverage would temporarily reach around 5.5x, excluding any cost efficiency. We have undertaken to issue new shares corresponding to at least 9.9% of the current number of shares in the company prior to the completion of the contemplated transaction. Following the equity raising, we expect our pro forma leverage ratio as of end of Q2 2021 to be approximately 4.5x. Karnov has a very strong and cash-generative business model, and over time, we expect that the cash flow of the combined group will allow for rapid de-leveraging following the closing of the transaction. This transaction will, in our view, bring value to our shareholders as well as strengthen the entire Karnov Group. First of all, we consider the transaction to have an attractive multiple of 9.6x EBITDA, excluding in-market cost efficiency. Additionally, given the future potential by combining the three companies, we consider the acquisition to be significantly EPS accretive. For the time being, we expect to keep our financial targets. They will, of course, be a subject of review should the contemplated transaction be executed. This was the end of our presentation. Thank you all for listening, and we are now open for your questions. Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Daniel Ovin from Nordea. Please go ahead. Yes. Good morning, Pontus and Dora, and congratulations on a very exciting deal. First question is on the competition authority. I can read in the press release here that you expect to have 25% market share in Spain. Can you say anything around that? Have you had any discussions with CNMC, et cetera? Is there any risk that this won't go through? Maybe you can comment a bit on that. That's my first question. Thank you. Well, there's always a risk there, but I'd say that we are not the ones to comment on ongoing approval processes. However, we are positive. Okay, great. Thank you very much. Second question. You also mentioned here, cross-selling opportunities, and I wonder in what area do you see the best potential here for adding synergies on the top line, so to say? Well, if we start by the cost efficiencies, we can see that there are three identified possibilities. It's around central functions. It's around harmonization of IT and content platforms. Also administration that is marketing, sales and back office and such things. When it's about growing, I would say that there is a possibility of cross-selling in Spain. That would definitely be interesting. They share the same similar products at least as we have in Denmark and Sweden, the kind of online and Gillenu. There are also other products. There will be interesting possibilities in the years to come as well to see possibilities between the Nordics and the Spanish, French entities. Okay. Then one question on the market overall. I mean, maybe you can describe a bit more the characteristics, growth profile, et cetera, and perhaps also talk about the competitive environment you will now go into. What do you see as your core strength, competitive strength there when entering these markets? Thank you. Well, the growth in the market is around 2%, and that is almost similar to what we've got in the Nordics, slightly lower than what we've got in the Nordics. The competition growth in Spain, when we have merged these two companies, Wolters Kluwer Spain and Thomson Reuters Spain, we will be number one, and number two will be Lefebvre. In France, we will be in the third place, so to say. Number one is Lefebvre Sarrut, and number two is LexisNexis. The markets are a bit more fragmented than in Sweden. We believe that what we did with Norstedts Juridik and Karnov, merging those two and getting into one platform, was definitely great from a cost efficiency perspective, but it also created possibilities of seeing, being able to create greater customer value. That's also a possibility. Okay, great. Then another question also. I saw on a slide here that you talked about 2024 to have realized 75% of the synergies. Then when it comes to the integration cost, do you expect that to follow a similar pattern? Yes, we expect that to follow more or less a similar pattern. What we mean by 75% of the cost efficiency is that we have taken actions to achieve the 75% of the cost efficiency. Okay. Great. Perhaps last question, just wondering about the equity issue here. I mean, is it possible to say when in time do you expect this? Is it closer to the deal or could that be well in advance or can you say anything more around that? No. At the moment, we have not concluded on the timing of the issuing of the new shares. We will see when that will happen. Okay, perfect. That's all my questions. Thank you very much. Thank you. Just as a final reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. We have another question from the line of Predrag Savinovic from Carnegie. Please go ahead. Thank you, operator. Good morning, Pontus, Dora and Erik, and congratulations to this deal. A couple of questions from my side as well. I was wondering if you could talk a little bit about the historic growth of these acquired entities, and also if you can talk a little about the contracts, customer contracts. Are they similar in the buildup of, call it core Karnov in that they are paid annually and paid in advance and also on the cash flow profile there in general terms? Yes. If we start with the revenue, as you also could see on the slide, there is a higher degree of offline. That is declining with approximately 10% a year. Overall, we have a very fine top line with the online part. We expect of course then also to continue with the online part going forward. You were asking about the contracts, and they are in the same similarity as we have in the Nordics, one-year contracts, renewed and paid up front. The only difference in that matter compared to the Nordics is that where we in Karnov, Denmark and Norstedts see that we have a high invoicing season in Q4 and Q1, it's more flat over the year in Spain and France, where it's more equal over the year. All right. Thank you. On the synergy side, if you could put some color on as to how aggressive the synergies are. Do you think they will be hard to reach, easy to reach, or somewhere in between? Well, first of all, we can say that the cost efficiencies we have looked upon is not regarding France. There is one French company from Wolters Kluwer. We have done more digging into the Spanish possibilities, combine Wolters Kluwer Spain with the Thomson Reuters in Spain. The company is called Aranzadi. In that we can see more of an opportunity of finding those cost efficiencies. There will be overlapping competencies. It's a bit the same that we saw in Stockholm when Karnov acquired Norstedts Juridik in 2018. A lot of experiences tapped into to Karnov since then, and hopefully we will get to use those experiences if this turns out to come through. All right. Makes sense. I've noticed that it seems that the recurring part of the business here is higher than the online part. It seems there's some recurring within offline as well. Could you talk a little bit about what this contains? What is it? Yes, that is, that's correct. The subscription base is of course online, but it's also offline. Just as we have in the Nordics, we have the prints and loose leaves which are ordered from the same contract as an online product. That is the same in Spain and France. All right. If you look at Karnov and you mentioned that you're gonna share some best practices in between. Looking at these new businesses now, are there any specific strategies or processes that you aim to change upon this acquisition when you've got a hand on the businesses, so to speak? Well, as Dora mentioned, we have given ourselves a bit more time than we had when we merged Karnov and Norstedts Juridik on a Swedish perspective. That's one of the learnings that we can see. We need time to make those cost efficiencies come true. We will obviously also work closely together with the local management to make sure that we identify the potential cultural differences, get to know the markets, their products in depth, obviously. There will be a lot of learnings from what we did in Sweden that we can use actually going into Spain especially, but also of course, France. Okay. In the Nordics, you've been quite successful now recently in finding new customer verticals. We're talking about municipalities utilizing your products. You have an offering for you know, accountants which you hope to cross-sell in between law firms, municipalities, et cetera, the EHS vertical. Looking at this material here, I've noticed it's mostly citing one business targeting medium-sized law firms to large ones, one targeting smaller ones. Thinking longer term here, I know it's not maybe a question for the next year. Do you anticipate to see cross-selling in the sense you know, Karnov adding new customer groups within these geographies as well? Well, right now we are focusing on this specific deal, but we definitely see opportunities as well to continue to identify interesting adjacent verticals. In Spain, Wolters Kluwer Spain actually has got a specific brand and product for public markets called El Consultor. So hopefully we will have the opportunity to use that also for cross-selling on the other markets, so to say. All right. Sounds good. That's all for me. Thank you very much for taking my questions and good luck with the deal. Thank you. Thank you. As there are no further audio questions, I will hand it back to the speakers. Okay. Thank you very much for listening, for the questions. We will see you soon, and that is in reporting Q4. In a couple of months, hopefully we will see you again. Thank you for listening in. Bye. This concludes our conference call. Thank you all for attending. You may now disconnect your lines.