Welcome to Vitec Software Group AB Q2 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing 5 on their telephone keypad. Now, I will hand the conference over to CEO Olle Backman and Head of Investor Relations Patrik Fransson. Please go ahead. Thank you, and a warm welcome to today's conference call. I am Patrik Fransson, Head of Investor Relations here at Vitec Software Group AB, and with me to my left is our CEO Olle Backman. As usual in this call, we will cover the report released earlier today and also give a short overview of Vitec. As always, we will open up for questions after the presentation. With that, I hand over to Olle. Thank you, Patrik, and then welcome all to this conference call. I will start, as always, with a short overview of the Vitec Software Group AB. As you know, I always talk from the customer perspective first. We are serving the 26,000 B2B customers. We do that from a decentralized organization through 46 business units. We are today present with our feet on the ground in 12 countries. We say that we have five or six home markets, which are the four Nordic countries and the Netherlands and Belgium as well, where we have the origin of these business units. I have nearly 1,700 colleagues to my aid, and the pro forma sales is up to SEK 3.6 billion now. Talking about sales, we say that we have our feet on the ground in 12 countries, but we actually have sales in over 52 countries by now. That's quite impressive. Moving over to the sales and the diversification, you can see here the distribution from the various markets, only 25% in Sweden. Of course, we originated, we're a Swedish company to start with. Up until 2011, we were 100% in Sweden, and now you can see that distribution there. You can also note here, we will get back to it on the FX here. Euro and Danish krona, it's roughly 60% today, so only 25% on the Swedish krona. You can see the largest business units, it's only 10% of the sales on the software sales. If you look at the customer also there, there is only 8% on the 10 largest customers. All in all, this is a great risk distribution in our mind. Talking about growth and how we handle that from a strategic perspective, we work with the business model, of course. We are usually market leaders in our various niches. We have a high percentage of recurring revenue, so that's a standard for our business units. We develop them further, and we do that through this decentralized organization. We do that a lot with innovation and the product investments. All of that is aimed at fueling the organic growth in the existing business units. We top up this with acquisitions. Basically, what we look for are the characteristics that have made us successful over time. Great vertical software companies, they are established, they are profitable, they own their own IP, so we are in control of the product roadmap, and they have a decent amount of recurring revenue to start with. These are the characteristics that we look for when we look into acquisitions. Speaking about acquisitions, you can see this is last year's seven acquisitions we did up until Q2 last year. We had made two acquisitions, and you can see the seasonality there. It's usually quite heavy at the end of the year. So far this year, we have made one acquisition in Q1 of Dutch Integrip, a nice addition here. As I mentioned in my CEO comments in the report we released this morning, we think that we have quite a solid pipeline still on M&A, but there are some postponements, there are delays, the discussions are sort of dragging on. It's taking more time than usual, usually from the seller's initiative. There have been quite a few closings as a result of that in the market. The few that have been closed have also been very highly competitive. Here we are very focused on our strategies and what we think is a good value for a nice vertical software company. We don't sort of get carried away and participate in crazy auctions that are really driving the prices up. We try to come up with a fair value to start with and stick to that as a strategy. When you look also at the different verticals that we are present in, you can see here also a great display of the distribution between different segments and niches. You can see the big ones here: property management, energy, finance, healthcare, very stable, all of those. There are some that are more exposed to, let's say, the volatility and the consumer environment. That would be the auto industry, for instance, or trade and manufacturing, fast-moving consumer goods, and so forth. It's always a mix. All in all, it's a great stability. We still see quite low risk in all these segments, and we have a very low churn. That hasn't increased in this time. I think this is a lot thanks to that we provide business-critical softwares. They are not nice to have, they are need to have for our customers. The business units, this is a distribution of sales and the proportion of recurring revenue. We usually talk about this model as well as kind of what the pipeline for M&A looked like because we're basically a mirror image of our pipeline today. There are a few bigger ones, but the average is roughly SEK 40-50 million in turnover. Sharing knowledge is a very important thing within Vitec. I also mentioned that in the CEO report this year. We have a lot of ongoing forums, which we call them, where we share best practices across the room. This is just getting better and better as we grow bigger. It is very much appreciated amongst the staff that we have. We have different clusters and verticals. You can talk about different specific issues in that niche, or from a technical perspective, or from a marketing perspective, or products or features. Of course, AI has been a really ongoing topic for the last years that we have had lots of collaboration between. I like to highlight the very powerful thing when you hear a peer talking about a very concrete and tangible example of how they have done. It could be for internal efficiency, how they use the different models and the tools that we have available for us. Or it could be from a customer perspective where we actually use AI in our applications. Two examples of that could be, for instance, real estate agents, both in Sweden and Norway. They use great AI products for functionalities such as describing the neighborhood, describing the properties, text generating. That makes the life a lot easier for the real estate broker. We're really helping them with that. Another quite advanced thing is within the energy forecasting models, where we have over the years used a lot of different models for forecasting. It could be weather, it could be production, and to forecast the day ahead pricing. Now that we have roughly 20 different models, we have trained our own AI tool to scan all of these for their strengths and weaknesses in different market conditions and different weathers. Then we use the best possible outcome to provide for our customers the day ahead pricing. That's also a very powerful way of using AI that has really helped us and our customers. Moving over to the quarterly results, I would just like to discuss a lot on the highlights here. For the quarter, a 4% increase in total net sales. For the first six months, that's a 12% increase. The recurring revenue share is on a high and a good number, 89%. Our EBITDA margin and as well as our operating profit was SEK 236 million and SEK 176 million, down 10% in absolute terms. We will get back to some of the reasons or the bridge for that. All in all, the operating margin, 19%, EBITDA margin, 26%. Fairly good, not our best quarter, and there's absolutely room for improvements here, but better than Q1 for sure. It's on the right track. Again, very importantly, one thing we really monitor a lot is the cash flow from the operating activities. That's also given the seasonality that we have. You should mostly look at the year-to-date figure there that has a healthy increase to SEK 843 million. We also provided since last call the internal metric that we use, which is the cash EBIT, which is basically the operating profit but net of any activations and amortizations and depreciations related to the product development. That's more closer to the cash flow generating profits. As you can see, that deteriorated to minus 5%, but still a good 22% margin there. As I also mentioned in the report, one of the things that stands out, or rather I would say the Q2 in 2024 was the exceptional high number for Enova, our Dutch business unit. The difference there in their transaction-based grid management products was down SEK 80 million compared to last year. At this point, I would like to remind everyone that Enova is doing great. It's a really great business unit. It is totally exposed to the market conditions here. The market on the grid balancing market, there are volume and there are price, and we don't control any of that. What we can control is our strategy and winning the daily auctions and to what extent we can participate. It's also the fact that we participate with our customers' energy or excess energy or excess capacity. We don't, we're not an energy producer ourselves. We use their excess. It's a great value add for the customers to have, but we don't have any risk. We don't have any production units to cover that. In this case, there is a sort of double whammy there. The volumes are a lot lower than last year, and the prices are a lot lower due to higher competition and stable environment. SEK 80 million down on the transaction-based for just Enova and SEK 30 million on the gross profit for Enova. You shouldn't mistake the SEK 30 million to try to calculate backwards the gross margin for Enova. It is a lot lower than that, more in the 20-25% region, which is the run rate. This is a combination of both falling volumes and falling prices that make up that number. If you add back the Enova and all the other 45 business units were doing fairly well. There is, as I said, always room for more improvements, and that is in line with our target for profits. That says we should have an operating margin of at least 20% and growing over time. We are working with that continuously. Speaking about cash flow, this is also just the highlights, and nothing really out of the ordinary here. It looks quite standard and in line with the different quarters that we have with a very strong Q1, of course, when we gather all our prepayments from our customers. The cash flow from the investing activities is usually the earnouts and the activations in there for the quarter. Net sales, as we see in the quarter there on the right-hand side, it's a bit up from Q1. It's going in the right direction and decent organic growth underneath it despite the downturn for Enova. Looking at the EBITDA margin, same there, we picked up a bit since Q1, quarter over quarter. Cash EBIT, which I mentioned, was sort of the internal KPI that we use, and this is just to see how the bridge there from the operating profit down to the cash EBIT. With a 22% compared to the 24%, but with that $30 million loss on or less profit, I should say, for Enova, that's fairly okay. As I said, room for improvement for sure. I would also like to highlight that we mentioned something in the report on the amortizations, on the intangibles, and the acquisition related. It has been some mixed change there since last year. This is perfectly in line, the same we had in Q1, now in Q2. Please use the 2025 numbers when you try to forecast on the future here. Also looking at the distribution here between the very stable, which is the subscription-based revenues, which is the basis here, very stable and gradually sort of improving over time. Here you can clearly see the Q2 2024 sort of outlier there with the very high bar on the dark blue compared to the others, which are more stable. If you look at it in the last four quarters, it has been quite stable. The organic growth, as we mentioned, and also the acquisition related, one acquisition so far this year, and the organic growth is still a very good currency, just the growth of 9%. We are expecting that to come down a bit. These are pro forma numbers. By now you have six months of last year and six months of 2025. It is coming down a bit as expected due to the fact that just the CPI indexes, which usually constitute how we increase our prices, are a bit lower this year, of course. We're expecting that to come down a bit, but still at a few percentage above the CPI level is where we usually land. Here you can see a minus figure on that transaction-based, and that's, like I mentioned, due to the market conditions there for Enova. This is just comparing the last year on a yearly basis, another way of looking at the organic growth. To sum things up, quite stable underlying performance from the business units. Enova, still a good quarter, a fantastic company, which we're very happy with. They have a sort of challenging environment there. The M&A pipeline is solid, and we are ready with our available resources for future acquisitions. With that, we hand over to the Q&A session. If you wish to ask a question, please dial #KEY 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #KEY6 on your telephone keypad. The next question comes from Christian Binder from Redeye. Please go ahead. Hi, and thanks so much for taking my questions. First one being, when it comes to increased customer caution about the organic side and on the M&A side, did you see any change throughout the quarter? From some companies, we've heard that April was very cautious and kind of normalized. Did you notice something similar? Was it pretty even throughout the quarter? No, it's been very similar. Like I said, no really surprises on the upside, but nothing on the downside either. It's been a bit dull, very stable, like I said, but usually stable is good in our environment. In this case, we were expecting, like I said in the Q1 call, we were expecting when we were there in Q4 that things were looking a bit brighter. All of you know how the macro environment has sort of panned out during this first six months. It's a lot of wait and see. Perfect, got it. You've already addressed it, but just to clarify, when it comes to this Q2, should we kind of see it as a "normal" performance for Enova? Yes, normal in the sense that it has been quite stable for the past four quarters. Q2 is a bit higher, a bit better season-wise because of just weather and the production mix. Q2 is still their best quarter for sure, but there's a lot more stability. In hindsight, it's really the Q2 2024 that's the outlier. The rest has been sort of fairly stable, but still there is a seasonality for Enova for sure. Great, perfect. Last question, I mean, you've addressed the potential use of AI several times in your operations. Longer term, you can obviously, for example, increase the efficiency per programmer that you employ, but there are also like other associated costs. Do you think you can use AI to kind of improve your margin profile over time, or do you think it will be roughly neutral? I would say that there is some room for that for sure, but it will take some time. You have to also remember that we have 46 development departments. We don't have one. In some of the larger business units, for sure, there is more room for efficiency there. In the smaller ones, one individual can have a lot of different roles. I think that we can produce more. Yes, we will have efficiency, but we will not necessarily sort of cut down on the headcount for that matter. I think that we can produce more and be more efficient. Hopefully, yes, there should be some productivity gains. All right, perfect. That was all from my side. Thank you so much. Thanks, Christian. The next question comes from Daniel Thorsson from ABG Sundal Collier. Please go ahead. Yes, thank you very much. I think it's similar to the first question here, but just to understand Q3 comps, how was Q3 2024 last year compared to historical Q3s, and what should we expect for this year roughly? I think Q3 didn't stand out in any specific sense. Like I said, it is very stable. If you deduct the Enova, like I said, Q2 2024, the rest is fairly stable. I think there's nothing really that stands out or stood out, I should say, in Q3 last year. Okay, I see. In terms of cash EBIT, can you comment how much Enova was down in terms of earnings year over year? Is that possible? No, we were not guiding on the bottom line profit, but Enova is in line with all the others in terms of margin. Of course, the actual kroner there, which I mentioned, the SEK 30 million, that sort of filters through. It is SEK 30 million less, basically, in absolute terms. I see. Given we have had weaker margin here for two quarters, are you doing some cost reductions within the group, like outside the normal trends and trims you always do? Anything this year to adapt to the market conditions? Like I mentioned, we are a bit more cautious when it comes to the rehire. We don't have any big sort of group-wide, because like I said, we have 46 different business units. Some of them are progressing really well and are investing according to plan, and they are, of course, allowed to continue with that. Of course, yes, we are more cautious. If someone is leaving, do we really need to sort of rehire that resource right away? Things like that, yes, that is for sure ongoing all the time. What I mentioned on the earlier questions there regarding AI and the efficiency, I think that's still yet to be seen a bit going forward. Yes, we are seeing increased efficiency in coding. I think that will be more like that we are able to do more with the same resources, because you have to remember that the environment that we live in, in the IT environment, it's really hard to get talented people. Once we have them on board, we really want them to strive and to, of course, produce more in that sense. Yes, we are more prudent or cautious when it comes to rehire people right away. It's a bit more wait and see on that sense as well. Okay, I see. Final question on the M&A market. You said it was a little bit more hesitant. I think all of us could have seen that in Q2, but we also saw that in the public market, the activity started here in June. I guess in the private market, it's a little bit longer lead times. What's your expectations of the summer here and going into the fall? Do you think activity will pick up or do you see anything else in your processes? No, we are expecting the activity to pick up because, like I said, the pipeline is really good and it has been fairly good. You can only postpone things to a certain extent. Yes, we are expecting the M&A market to pick up. Of course, we need to be able to be successful there with our offering. There are some cases that we know have been postponed and will hopefully be decided upon during the fall here. As you saw also on the charts last year, we did two up until Q2 and then we did five during the fall. Excellent. Thank you very much. Thanks, Daniel. As a reminder, if you wish to ask a question, please dial #KEY5 on your telephone keypad. The next question comes from Daniel Lindkvist from Danske Bank. Please go ahead. Hi guys, just to elaborate some more on Enova going into Q3. Now it seems like you're guiding for that it was nothing special with the volumes in Q3 last year, or at least not as much as in Q2. On the profitability side, should we expect that the gross margin in that business is some 10% lower or something like that this year when we calculate our numbers, or what's a fair assumption? I think that that's a fair assumption. The margin for both Q1 and Q2 this year has been fairly stable, and we're not seeing any sort of further decrease in that. Compared to last year, the prices are lower. Like I said, that's a mix of more volumes in the markets, more players in the market, and also just very stable weather conditions that does that. At the same time, we are innovating, we are expanding our product offering to look into more and more different product models for Enova as well. The margins are a bit lower than last year. Like I mentioned, Enova as a total are still very much on par with all the others in terms of the margin on EBIT level. I mean, I guess it must be a bit frustrating for you guys if you have a low-quality earnings beat from Enova being better than nothing happens with the share price. Then you have a low-quality miss in a quarter that's much isolated to Q2, as I read it. Correct me if I'm wrong. You get the 16% hit on the share price. Naturally, this is a subject that needs to be fully understood by the market, I guess. Yes, and that's also why we try to be a bit more transparent than usual around that specific business unit and the comps there. Because all in all, like I mentioned, Enova is doing well. It is progressing nicely. They are absolutely on par with all the others and also in line with what we actually paid for the asset, not to mention that. It's a good investment and they are doing great. It is also by far the biggest sort of business unit that we have today. Cool. My final question is on the transactional part. You also have the Enova business unit that entered with two more quarters than last year. How has that business unit performed, and what should be expected since that will also hit the margin profile if they are successful? Now they are in all the four quarters backwards. That shouldn't sort of take anything if you just look at the four quarters going backwards from here. Bid Theater, they have a lower gross margin profile because, like I said, they have a software and then we run through the media purchases through our books. Ideally, that's not something that we prefer, but the customers want it that way. We just have to accept that. Bid Theater is also progressing according to plan, being quite a flattish in terms of growth because media spend, it is a bit up to the general market conditions there. At the same time, they are doing okay, but they're not going to make any changes or distort the numbers going forward. If you just look at the quarters behind us, they are already embedded in that. Okay, perfect. My final question for Q3, just to be a step ahead for my and others' sake, is there anything we should bring with us in a newly acquired unit or some new dynamics that we haven't seen before that you could flag in advance, or should it be just business as usual for the Q3 quarter? Given that the acquisition we've done so far this year, it came really early in the year and was quite small. I think that there shouldn't be any big changes to, or there aren't any big changes in how we operate today. We still see a bit lower on the services and on the licenses. I mean, now we're two weeks soon into July and the market conditions are the same. Like I mentioned, they are not better, but they are not worse either. It's kind of flattish so far. One of the companies that has a lot of that is, of course, ABS. They are going into the holiday season now in Europe in August here and September. I think nothing really stood out last year, and that should be a fair, fair sort of proxy going forward if you take the margins that we're operating now and just roll that over. Okay, perfect. Thank you. The next question comes from Predrag Savinovic from Carnegie. Please go ahead. Thank you very much for taking my question. Good morning. I wonder if you could discuss the overall M&A strategy and rationale for the coming years if you see an environment where multiples are still higher, like you have suggested in the report and in this call. If this competitive dynamic remains, how will you treat that? I think that given that we have been in this market for many years now and we have a very sort of clear strategy, there are lots of companies out there and we see them coming to the market. Like I said, the private market is slow to move up and slow to move down as well. What we are thinking, at least my analysis so far, is some of the postponements are, in fact, that the targets are perhaps not meeting their own ambitions and targets. You have an IM with a real hockey stick and that they're supposed to take off. They're progressing nicely and well, but not in a fantastic hockey stick way. They, okay, am I as pretty as possible right now? They are sort of holding on to that. That's a good reason then to postpone things. The few transactions that have sort of gone through have either been really early stages and we're not in them or really big companies that have a potential to grow, especially internationally. There the competition from PE and others is fierce. Okay, perhaps that's not possible for us to compete with because you have to be prudent when it comes to what you're able to pay. We're confident that we have a really good offering and we pay decent prices. At the end of the day, especially if you are a founder-led company, the last euro is not the most important thing. Of course, we are looking into our offering. That can be, for instance, last year we did two part acquisitions, both Taxi Technique and Trinity. We bought 60% initially, but we have a clear path to 100 there. That's one way of sort of mitigating this. We are looking at different earnout strategies and we're working constantly with our offering to better sort of suit the potential sellers. I think that we need to just think of how we offer, how the offering is constructed. Okay, very good. Thank you. That's all on my end. Okay, thanks, Predrag. There are no more questions at this time. I hand the conference back to the speakers for any closing comments. Thank you for listening in. I hope that we will hear each other again at the next conference call, which will be in October. I hope you all have a really nice summer. Thank you.