Addnode Group AB (publ)

Hello, everyone, and welcome to the presentation of the Adnode Group Q2 report for 2024. I'm the CEO of Adnode Group, Johan Andersson, and with me, I am our CFO, Kristina Erström-Mackintosh. And I know it's a busy day for most of you and a lot of reporting companies. So thank you for taking this opportunity to listen to this as well. So for today, We will follow an agenda. We dive into Q2 and a little bit about what we believe the investment case is. And then we'll open up for questions. And then you'll find some supporting material in the appendix as well. So looking at Q2 2024, we believe that it was a quarter with growth and robust earnings improvement. uh it was a strong quarter friend group we had organic and acquired growth and a robust improvement in earnings net sales increased by 29 percent 11 percent was currency adjusted organic growth ebitda increased with 37 47 percent to 162 millions and earnings per share improved by 64 percent we also had a strong cash flow from from operating activities, who increased to 178 million compared to 127 million in Q2 last year. Looking at the quarter, we can see that we had a strong growth for symmetry in division design management. We had an addition of the acquisition of Team D3, and the cost efficiency in product lifecycle management contributed also to the positive development in the quarter. After the end of the quarter, we have announced two smaller acquisitions, Prime Aerostructures in the product lifecycle management division and Adoceo in the process management division. Looking at the economic situation, we can see there's still some uncertainties. Although customers are postponing major investments in new products, there are many opportunities for upselling to existing customers driving growth. Looking at rolling 12 months, we are now at the net sales above eight billions and profits are trending up. I'm proud of our employees' ability to both pursue daily improvements and invest in new digital solutions and carry out acquisitions, all with the customer in focus. With that as an introduction to Q2, I would like to hand over to our CFO, Kristina.

Thank you, Johan. and i would like to start by sharing a few more details on the net sales development and the revenue breakdown and we have two pie charts in front of us and that is showing the breakdown on essays from two different perspectives so if we look at the pie chart to the left we are presenting a breakdown on that phase by geography and the international expansion into the u.s market has been strengthened by the acquisitions of Symmetry US, which was formerly named under Microdesk, and Team D3 in Design Division. And you can see that approximately 28% of the revenue come from the US market, and that is the same level as Sweden. And then it's followed by UK of 19%, and Germany 10%, and other countries was about 15%. And going down to the pie chart to the right, we can see a breakdown of net sales by category. And we can see also that the recurring revenue continued to form a stable foundation for our business. And in the quarter it mounts to 72% of net sales. And recurring revenue consists of both third-party sales and also revenue from our own solutions. And we can also see that the service revenue increased about 15% in total this quarter. And that consists of both service related services relating to our own software offerings and also customer specific solutions. And also the largest increase in consulting services is coming from acquisitions in the design divisions. And then I would like to hand back to Johan from Divisions Details.

Thank you, Kristina. So looking at Anna Group, everything we do is about digitalization for a better society. This is why we exist and what we want to achieve in everything we do. Our digital solutions transform both the private and the public sector to design, build and operate more sustainable products, buildings and societies. Our key markets enjoy a strong and continuous growth driven by global trends in urbanization, digitalization, automation, AI, and sustainability. And I would like to share three examples of what we mean by that. So in a rapidly changing world, responsible and efficient use of resources is crucial when it comes to building a long-term sustainable society. And these are three concrete examples of how we are working with our customers to develop digital solutions for efficient resource use and a more sustainable society. Looking to the left, you have an example of proactive maintenance strategy that saves time and money. Our company SWE have supported catering NHS in the UK with digital solutions to collect and digitalize information on drawings, equipment and transportation data, among other things. The time spent on maintenance is now reduced with dissolution, and so are delays in clinic services. This more proactive maintenance strategy now saves about 4,000 pounds every week year-round for catering NHS. In the middle, you'll find an example of more efficient simulation that reduces carbon emissions from buildings. Our company Teknia supported Catapult in developing a more efficient simulation tool for energy usage in buildings and assessments of low carbon heating systems. After the improvements, Catapult can now offer faster evaluation, selection, and implementation of technologies that reduces carbon emissions from a building's heating and cooling systems. And the third one, looking to the right, is an example of a platform for circular and recyclable packaging. Our company, Deserno, has developed a new business and logistics platform for the organization Näringslivets Prudentansvar in Sweden. It's a platform that has the capacity to enable customers, businesses and municipalities to achieve higher recycling rates, as well as supporting manufacturers and recycling facilities to design more sustainable packaging. So it's three good examples of how we can help our customers with digital solutions to make sure that we develop digital solutions for more efficient resource use. So with that and an introduction, let's go back to our three divisions. As you all know, we are organized in three divisions, design management, product lifecycle management, and process management. And looking at the distribution of our three divisions, you can see clear to the right that design management represents roughly half of our earnings. Product lifecycle management, 20%, and process management, 30% in Q2. So design management. Second quarter, we had a net sales up increase with 56% to roughly 1.2 billion. Adjusted for currency, organic growth was 22%. We can see improved sales in both Europe and U.S. The acquisition of Team D3 and the product mix with a higher share of revenue from Autodesk-free agreements has also contributed to the significant improvement in the quarter. The division's operation within digital solutions for design, BIM, and product data, which are conducted by Symmetry, experienced increased demand and strong sales during the quarter, with the sales mixed with the larger share of Autodesk agreements compared with the corresponding period last year. Saves in the UK were strong both to the construction and manufacturing industries. In the US, we noticed stronger saves to architects and technical consultants compared with the preceding year. But please observe that last year's comparative figures were impacted by weak saves, mainly in the US. The cost reductions implemented in the US operations in 2023 continued to contribute to earnings in the second quarter. Moreover, the acquisition of Team D3, which was completed in July 2023, contributed positively both to net sales and earnings. ServiceWare's Global, which provides digital solutions for facility management, and Trivia, which provides collaborative solutions for the construction and infrastructure sector, display stable growth. So, looking at the change in the new transaction model that we have discussed earlier we can see that we are now moving into a situation where we have had the the us exchange was completed in june 10 2024 that means that we are starting to sell according to the new transaction model but please be aware what The rev rec is when the start of the contract. That means that we can sell according to the new transaction model, but the start day of the contract can be at a later date. So there's a delay there in between. So that means here in the Q2, we have very little impact in our books of the new transaction model. I think it's way below 10 million SEK in net sales. that we have recognized according to new transaction model in Q2. So you will see the effect in Q3 starting there. And then in Europe, there has been announced a date saying that the transition will start in September 2024. So that means that we will start to sell according to the new transaction model in Europe as well, end of September. And that means that you will probably not see any real effect our P&L of new transaction model from Europe in Q3 it will probably happen in Q4 and that you will see the effect. So with that I think let's move on to PLM. In the second quarter for PLM, net sales were unchanged at 468 million. Adjusted for currency effect, the organic growth was minus 2%. However, EBITDA increased to 37 million. The cost efficiency measures implemented in 2023 meant that the EBITDA margin improved from 4.3% to 7.9% in the quarter, despite negative organic growth. Earnings for the previous year were also affected by a cost of 10 million in Q2 2023. Demand for PLM systems and associated services was good in the Nordic countries. Sales were slightly weaker in Germany, UK and US due to a decline in licensees in the automotive industry. The economic situation interest rates have affected customers' decision-making processes concerning new and larger system projects investment leading to more frequent postponements during the year. Service revenues, implementation, integration, et cetera, was somewhat higher than in the previous year. The trend of customers increasingly preferring to rent licenses on a fixed term basis rather than purchasing licenses with perpetual right of use continued as before. And the group, we are a growth platform from entrepreneurs. It means that we acquire and support entrepreneurial companies in their efforts to become even better. So far, we have completed six acquisitions in 2024, and we continue to see many opportunities for further acquisitions. In PLM, we have made an acquisition this quarter. It's Prime Aerostructure. It's leading the solar system partner base in Austria. and a simulation leader in the aerospace engineering industry. The company has about 10 employees and net sales of approximately 45 million. It's a bolt on acquisition to Technia and will be consolidated in Q3. Division process management. In the second quarter, net sales increased by 5% to 335 million. Adjustable currency effect organic growth was 4%. EBITDA amounted to 59 million, and the margin was 17.6%. Municipalities and public authorities show continued restraint in terms of investment in major projects, meaning less tenders out there. And they were in queue to then previous years. But sales remain stable. That has to do with the division's good and well-established relationships with a large public sector customer base that present frequently opportunities for recurring sales and expansion of current assignments. The division's business are well-positioned in public sector tenors, owing to their attractive digital solutions, in-depth experience and good references. We have made two acquisitions to division management this quarter. The first one is GPS Timber. It's a software for timber yard logistics, supporting management of raw materials as sawmills and pulp mills. It has installation in over 40 industry facilities around Europe. It's a net sales of around 8 million. We have previously owned 50% of the product and now we have bought the last 50% of the So it means that we are the main owner of that now going forward. We also made another acquisition to the division. It's a company called Adoceo. Its software is used to manage cases related to transportation of people with mobility or cognitive difficulties. It has a net sales of roughly 50 million and it will become part of the company Stanford in the division. And this will also be part of the Q3 results going forward. The two good examples of it can expand our software portfolio in the division. So with that, as an introduction to the outcome of the divisions, I would like to hand over to our CFO, who will walk you through cash flow and financial position.