Addnode Group AB (publ)

Now I will hand the conference over to the speakers. Please go ahead.

Hello, everyone, and welcome. I'm the CEO of Adam Group, Johan Andersson. And with me, I also have Kristina Elström-Mackintosh, the CFO of Adam Group. Together, we will introduce you to our interim report for Q2, and we will also end with a Q&A. For those of you who are new to Anigroup, I would like to inform you that our reporting currency is Swedish crowns. As you can see, the agenda for today. Before we start with the interim report, I would like to remind us of what Anno Group is all about. Our purpose is all about digitalization for a better society. Through innovation and continuous development in close collaboration with our customers, we create digital solutions for specific needs. The software and digital solution that we provide helps to design buildings, infrastructure and cities, and also the products that we all use every day, like cars and all the way to life science instruments. When things have been designed and built, it needs to be maintained with a lifecycle perspective. And the public sector has a responsibility for rules and regulations. Our digital solutions make all this possible. I would like to start by presenting the Q2 result on the higher altitude. All Admin Group had a good performance in the second quarter of 2025 and EBITDA improved compared with the year earlier period. From a group perspective, the market trend was stable in the Nordic countries, the UK and the US, while the German market remains weaker. EBITDA improved significantly to 238 million compared to 162 million last year, corresponding to an EBITDA margin of 16% compared to 8% last year. The increase in underlying earnings was partly strengthened by early renewals of three-year agreements in the design management division. EBITDA was positively impacted in an amount of 70 million as customers chose to renew their Autodesk agreements earlier. These agreements would otherwise have been renewed in the third quarter. A cost-saving program has offset the weaker German market in the PLM division, and the process management division strengthened its EBITDA margins. A stronger SEC had a negative FX impact of approximately 17 million on EBITDA in the quarter. If we adjust for the FX impact and early contract renewals, EBITDA would amount to 184 million, corresponding to an adjusted EBITDA growth of approximately 14%. Customers' early renewals of three-year agreements in Q2 are not expected to impact full-year earnings, meaning that all else being equal, EBITDA for the third quarter will be impacted with an amount corresponding to, say, 70 million. We have completed three new acquisitions, GNS in Norway and two asset deals in the US. All three acquisitions will be consolidated from July, meaning that they are not consolidated in Q2. GNS to the left provides a no-code platform for business critical solutions for customers within banking, insurance and public sector. It is mainly used to manage complex processes where documentation, regulatory compliance and internal governance are key requirements. The unit has a net sales of 765 million with a strong EBITDA margin. It will be consolidated as part of division design management. Symmetry and division design management have done two asset deals in the US that will strengthen our market position Thanks to our strong financial position, Anna Group can continue executing on its long-term value-creating acquisition strategy. We still have several active acquisition processes underway, and acquisitions are an important part of our growth strategy. We are operating our business in three divisions, design management, product lifecycle management, and process management. Looking at the three divisions and their performance during Q2 for net sales, gross profit, and EBITDA, at the pie chart to the left, you can see that design management was accounting for approximately 46% of net sales in the quarter, PLM 30%, and process 24%. In the middle chart, you can see the share of gross profit where the sign had 54%, PLM 20% and process management 26%. Looking at our EBITDA divided by divisions to the right, you can see that the sign accounts for 64%, PLM 12% and process management 24%. With that, I would like to go over the three different divisions and the outcome for Q2. Design management. The design management division's strong improvement in EBITDA was attributable to favorable sales in the US and therefore mentioned of three-year Autodesk agreements. EBITDA increased by 99% to 171 million and the EBITDA margin increased to 25.6% compared to 7.1% last year. EBITDA was positively impacted in the amount of 670 million as customers choose, for business reasons, to renew their Autodesk agreements early. These agreements would otherwise have been renewed in the third quarter of 2025. The other two companies in the divisions, SWG and Trivia, delivered a stable performance compared with the year earlier period. Reported net sales decreased by 45% to 669 million. Compared with the year-early period, the transition to Autodesk's new transaction model and change to the classification of third-party agreements also impacted the comparative figures. If the same comparison had instead been based on the previous Autodesk reseller model and before reclassification of third party agreements, currency adjusted organic growth would have been positive and amounted to approximately 53%. We can also see that the integration carries on in the division. Symmetry carried out its first acquisition in the US, Microdesk, in 2022, followed by the acquisition of Team D3 in 2023. Two companies are now merging to form Symmetry US, thereby becoming even more competitive in the US market. Division Product Lifecycle Management. The PLM division noticed a stable market trend in the Nordic countries, the UK and the US, while the German market remained challenging. Sales to the strategically important aviation and defense segment increased during the quarter. Before reclassification of third-party agreements, the division's current adjusted organic growth amounted to 1%. However, reported net sales were impacted by reclassification of third-party agreements. As of the fourth quarter of 2024, sales of certain third-party agreements have been reclassified in accordance with this agent model. If this reclassification had not been implemented, the current suggested growth would have been positive by approximately 2%. EBITDA decreased to 33 million and the EBITDA margin narrowed to 7.4%. As previously communicated, measures have been initiated in the first quarter to add organization and cost to current market conditions. These measures have progressed according to plan. The restructuring cost of approximately say 24 million that were charged earnings in the first quarter are deemed to generate yearly cost savings of approximately 45 million. Process management. The process management division delivered yet another strong quarter with growth and an improved EBITDA margin. The division's net sales increased by 5% and EBITDA by 10%. This marked the fourth consecutive quarter in which the division's EBITDA margin improved year on year. EBITDA was positively impacted by price adjustments, increased operational efficiency and contributions from acquired companies. EBITDA increased by 10% to 65 million and the EBITDA margin increased to 18.5%. The market for the division remained unchanged with stable demand for case management and geographic information systems for the public sector. And with that, I would like to hand over to our CFO, Christina McIntosh.

Thank you, Johan. Yes, I'm going to take you through the consolidated cash flow for the quarter. And starting out from cash flow from operating activities in the first quarter, it was 33 million SEK compared to 178 the previous year. And as you can see above, it was mainly impacted by the changes in working capital. And that is mainly related to the division design management. And the changes were mainly related to change in payment terms for out-of-desk three-year contracts. And we have already communicated that earlier and also highlighted that in last quarter. that the change in payment terms, which began in 2023, meant that the three year contracts are not paid annually during the contract term. And before 2023, they were paid upfront in advance for all the three years. And over time, the cash flow will align with the earnings much better. And also like to pay attention to this, the change in payment trends should not be confused with the changes of Autodesk transaction model. Going down and looking for cash flow from investment activities amounted to minus 62. And that is mainly related to our investment in proprietary products and also acquisitions made during the quarter. Going down, cash flow from financing activities, 148 million. That includes a dividend that was paid of 154 million SEK in May, and also new loan of 437 million that was drawn in Q2 for acquisitions, for the acquisitions that we made and completed after year quarter end, and also earn out payment after the period. And we also had a small proceeds for the shares in accordance with the incentive program of 5 million. And we also amortized loans in foreign currency of 139 million SEK. And then I would like to draw your attention to the consolidated financial position here. Notice that this is the operational balance sheet and not the balance sheet that we present in the report. And we continue to operate supported by a resilient balance sheet, which is important for us for our continued growth, both organically and through acquisitions. And the decrease in the balance sheet from the beginning of the year is primarily driven by the currency effects. And you can also see that our business model enable us to operate with a negative net working capital, and we continue to do so. It's minus 328 million SEK. And in the line item, provision taxes and other debts includes future earn-out payments, depending on the financial performance of the acquired companies. And as of 30th of June 2025, total earn-out and other liability sellers amount to 458 million SEK. And the majority is for the Microdesk and TMD3 acquisitions in previous years. Net debt amounted to 1.1 billion SEK. And we can also see going down the line that the return on capital increased to 90% from 15% in the previous years. And we also have a cash position of approximately 730 million SEK compared to 674 as of end of December 2024. And of the total available facilities and the revolving credit facilities of 1.6 billion, approximately 0.7 billion remains unutilized as of June 30, 2025. And over to you, Johan.

Thank you, Christina. So 2025, I think it's a year when we must look beyond the business model transition in division design management and how we recognize sole third party software to grasp the underlying growth. Q3 2025 will be the last quarter with net sales not being comparable year over year. When we started this transition, we had a clear communication that EBITDA would not be negatively affected and it would be a good way of understanding the business progression. If we look at 2025, EBITDA was 168 million and rolling 12 months, EBITDA is 904 million. It's a compounded annual growth rate of 19% on the progression of EBITDA. We are delivering on a growth strategy, combining organic growth with a value creating acquisition strategy. There is a good demand for the business emission critical digital solution that we deliver to our customers in various industries, including construction, property, infrastructure, manufacturing, defense, life science, and the public sector, both in Europe and in the US. Our business model with a large proportion of recurring revenue is a source of security in more uncertain times. The economic and geopolitical situation remains uncertain and primarily affects the customer decision making process for major investment decisions. Looking to the future, we are confident in the ability of our companies to adapt their offerings and organizations to the demand and the economic situation in their respective markets. Before we end the presentation, I would like to remind you all of our upcoming event. We have a Capital and Markets Day, actually our first as a group, September 22, 12 to 17 Central European Standard Time in Stockholm. And here's a link for our registration. So with that, I would like to open up for Q&A.

you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key 6 on your telephone keypad the next question comes from Eric Larson from Seb please go ahead thank you for taking my questions I have a few so first off on these last two acquisitions in design

Correct me if I'm wrong, but we haven't really seen these types of transactions before. So I'm just wondering if this is a consequence of the new transaction model, which opens up more opportunities for you, or is it rather a changed strategy on your end?

Thank you, Erik, for the questions. sort of we have done as it is before, but you're correct that we have done not that many as it is in Symmetry. And what we are doing is that the US team in Symmetry has sort of had a good discussion with several parties there, and we have found an agreement with them to acquire the customer base and a few employees and that. So you're correct that we haven't done much of it. and i think it's driven probably by several reasons one we have a good very strong position in the market so people know that we are willing to expand in these areas and they the guys that we are buying these from they are having several operations so they are not only being authored as partners they have other operations as well and i guess that probably relates to changes because We do like the changes and we think they're good for them. But if you're someone who probably doesn't know the business, then it probably makes sense to sell.

It's a mix of factors. But I think we see a good way of it.

Okay, thank you. I seem to have some issues with my lines. I hope you can hear me. I have two more questions. Okay, good. Two more technical questions then. You had 31 million in eliminations on EBITDA level, which stands out. Is there anything specific here?

Yes, we have some. But you're looking at comparing to the last year, same quarter. And we have a little bit more of the transaction costs. And we also have invested in employees. We have more employees on the group level, and we also invested in supporting the neutral sector in the CSRD implementing systems. And you could see that the run rate is about two to three million. All that is related to normal run rate.

Okay, so I guess we should assume somewhere along those lines costs at this level on a central level. Perhaps a bit boosted this quarter by transaction costs. Yes. Okay. Okay, thank you. And then lastly on FX, you wrote that you had a 16 million negative current impact on EBITDA and I think usually the impact is pretty immaterial. If I'm correct on that, what cost this 16 million this quarter?

I think the effect of usually the FX effect is more immaterial to the ratio but this quarter is 60 millions yeah yeah we will know the effect is the weekend dollar and we have a little bit effect on the pound as well and euro but it's mainly from the from the dollar weakening and we normally don't disclose that information but as it is a little bit more material and include that as well in the report just to make it easier to compare quarter by quarter okay makes sense thank you that's all from me thank you

The next question comes from Thomas Nielsen from Nordia. Please go ahead. Thomas Nielsen, your line is now unmuted. Please go ahead. The next question comes from Daniel Thorson from ABG Sundahl Collier. Please go ahead.

Yes, thank you very much. A question on the market here. You say that some larger projects are impacted by the uncertain macro environment, and that likely culminated here in Q2, I guess looking at other companies, of course. But it still looks like you are growing quite well underlying in both design management and there is also no further decline in PLM. So where are you seeing these delayed projects mainly, geographically but also segment-wise?

Thank you, Daniel. It's what we can see that is that our customers, we don't sort of lose any customers. On the other hand, we seem to be growing the number of customers, but we can also see that there are potential for more things to be done by the customers and at some point they need to invest. So it's more of that. So we're not saying that are not investing we're saying that they probably would invest more if there were a more positive sort of market view but specifically we it's related to the german market where we can see that they've been a tough market for the last three years it's still there but so if you look specifically in geography it's germany where when we have seen because as you all know probably read the papers there have been discussion in the automotive industry and how to invest. So I think the German market is the short answer.

Okay, so there is less effect of project delays in the US, UK and Nordics, it sounds like.

But we've been living with this for the sort of the last few years. So it's nothing new. I see.

And then also technically here on the 70 million positive effect on EBITDA, was that also around 70 million on sales in segment design management as it is third party licenses?

It's the result effect. That means that there are some direct sales costs related to that. So that has been sort of taken in consideration when in the 70 millions. Okay, so the effect on sales is that... These guys have commission, for example. Commission directly related to that sales has been included in that 70 million.

Okay, good. So the sales effect is slightly larger, but not much.

Yep.

Okay, good. And then finally on the two carve-out acquisitions here that we heard about in the first question. Can you share anything about profitability in these assets you are buying and also roughly what multiples you pay for these type of acquisitions?

Good question. We have said that they have a run rate of around 52 million together, those two SEAC. That's the net sales that will sort of be reported in our books. These are asset deals. And we are also saying that we are signing contracts with 14 employees. those are the costs that we sort of take on addressing them. We already have the management team in place. We have the setup, we have the structure. So we are sort of only taking over the customer contracts and those 14 personnel. So you have to do your math from that to how much that is. So we'll have a positive effect on the result. So the only cost that we'll take over is related to the personnel. those 14 guys to the 52 million in net sales.

Yeah. And they report according to net accounting, I assume.

Yeah, that's OK. Yeah. So it's in the new transaction model. So nothing. Oh, and then how do we pay? What we are saying that from this type, we have said that we have paid down to four times operating profit on when we have been buying sort of more of a customer agreements and etc. I think. And we have paid up to 10 times when we are acquiring software on IP high growth. And those barriers of valuation are still valid. And here we are in the low end of it on the force. Thank you.

The next question comes from Daniel Gerberg from Handelsbanken. Please go ahead. Thank you. Good question.

Daniel, it seems that your mic is... Daniel Gerberg, your line is unmuted.

Please go ahead.

Can you hear me? Very soft.

Can you hear me? I can hear very sort of in the background.

Can you hear me now?

Yes.

Sorry, my headphones... seems to be not working yeah a question on PLM and that would be you had some 24 million in restructuring charges in q1 you aim for 45 million in savings and you haven't didn't have any additional restrictions too so the question is do you plan for any more restructuring charges in second half to receive these 45 million

No, we don't. To make this happen, we don't see that we have more restructuring charges. And we have seen some effect of it here, a positive effect in Q2. We'll see more in Q3, and sort of the full run rate we expect to see in Q4. That means that some of these 45 will be materialized in 2026.

Perfect, thanks. And a question on design management, if I may. You had some 43% adjusted organic growth. You're right on that. It comes from obviously these renewals, which is 70 million plus the margin. But was it any other positive impact except for these renewals in Q2 driving this growth?

We do have, if you sort of take away those 70, there is a growth in the division and that also related to, we have a sort of a strong underlying growth in the US market supported by those. We also have a If you look at the ones that we don't talk that much about, SWG and Trivia also have a growth in the result compared to last year. And then it's a softer one. So there's a growth in the business as well. So if you adjust for December, you will find that we are still sort of growing compared to last year in design management.

Yeah, that's great. And if I may also on the process, I can comment on the genus acquisition. Early days obviously consolidated here in July. But can you remind us about seasonality and the modern impact from genus going forward? Thanks.

uh the seasonality to be expected is quite uh distributed over the year because this is own ip own software so it will be distributed over the contract pair so we have none of the effects that we usually discuss in design management that's one thing and then what probably is so i think the best approximation is the one that we actually have in design management as of now

Perfect. I'll leave it there and thank you and have a great summer and nice report.

Thank you Daniel.

Next question comes from Frederick Nielsen from Redeye. Please go ahead.

Thank you. Hi. I was wondering regarding the larger authorities within process I mean they have not really been investing that much in larger projects for a while is that mainly cyclical or do you see a tendency of them getting more digitalized as well and what do you believe it will take for them to start investing again?

Thank you Fredrik several questions if you look at We for them to get started, they probably need more funding from the from the state to sort of if you want to drive those. So that means that there are pockets within the administration that are getting the funding. So that means that in the world we're living today, it means that legal defense and those guys are the ones that are getting the money. So what do you. called it more environmental software are not getting that much funding for growth and new things that's reality so we are going after the pockets as well so there are growth opportunities there and we are drugs on driving some products there but if we want to see the biggest sort of growth the funding needs to increase as well uh are they working in digitalization definitely so we are working with the customer that we have And then, so there are business to be made. Was there one more part of the question that I forgot, Fredrik?

what will it take for them to start investing again? But I guess it's more money than basically.

The underlying is that they need more funding. And there are different parts of the government agency who are getting more funding. And I guess it has to do with the work we're living in today. So that means that you will probably find more of the projects more related to defense. And we are working with them as much as we can. We are... Also, the Swedish police is one of our biggest customers in this area as well. And if you're going to get the broader attention to the other state agencies, probably they need some more funding as well. But that floats over time, depending on which side the government decides to prioritize. But we can support them all. Our sort of software works for all. So that's agnostic in that way.

Okay, great. Thanks. And lastly, from my side, PLMs seem to do quite well, given the market conditions. I mean, is Germany somewhat stabilizing or is it the growth in aerospace and defense that explains the decent numbers?

I think it's too early to say that Germany sort of is out of the woods, but As Germany is not growing, it means that the other parts are growing more to support the 2% growth. So if we look at besides in the Nordic, in the UK, in the US market, you will find that we are growing compared to last year. So there is a growth in the market there. And we're trying to catch what we can. So let's see if we can find growth in the German market well, then be more and then at the same time the management teams are working great with address the cost base as well to make sure that we get the margins out of the business so yes there is growth and we're going for that and it's not only defense and aviation it's in the i think it's a we are a reflection of the different business structure where we are at so that means in the nordic we have a broader customer base In the UK, you will find that we're both moving towards district manufacturing and defense. And in the US, we don't have a strong market position, so it's more depending on what type of customers we have been attracting.

Thank you very much. That's all for me. Thank you.

Next question comes from Thomas Nielsen from Nordia. Please go ahead.

Thank you for taking my question. Process management has delivered good organic growth this year. How do you view the medium-term growth potential for process management, and do you see any opportunities to expand beyond the Nordic public sector?

Thank you, Thomas. Looking at process management and the growth opportunities, right now we can see that we have a good, strong growth in it, and I guess and being in position where we are in Norway we are probably growing with the market as we have a very strong position in the market for example look supporting local municipalities with software for managing infrastructure and case management system in the public sector Norway we are getting a stronger position so we are probably not expected to grow more then there are some kpis related to our support agreements and this year we have supported from that as well so having said that if we can grow this business five percent year sort of on average that's good and then your other questions Sweden and Norway where we are today. Yes, we can, but we can't probably grow all the software that we have as the software are adopted and well suited for the different regions as well and how the sort of the public sector is operated. But there are part of the portfolio that is probably easier to move. Everything that has to do with where things are, geographical information, for example. There are how you handle different types of case management we can move. But I think the biggest opportunity for us is that we have a strong management team. who knows how to run these type of operations support them over time and how to grow that meaning that there's a possibility for us to acquire companies outside the nordic and support them with the knowledge that we already have now i think that's probably a bigger sort of growth potential over time okay thank you very much thank you

The next question comes from Michael Lassine from DNB Carnegie. Please go ahead.

Okay, hi. A couple questions. First of all, can you clarify the underlying performance for design management in the quarter if we exclude the contract timing effects? Just to be clear on how that is performing.

Yeah. The probably easiest way is to actually look at the EBITDA because we have a lot of things, like I said, change in different transactions and etc. So if you look at last year, we design management delivered an EBITDA of 86 million. And if you sort of 171 million. And if you deduct the 70 million from this year's performance, you will find that the growth is 18%. I think that's probably a good approximation of how... If that makes sense.

Okay. Yeah, yeah. I was just trying to understand. I don't understand the question. And... How we should think about the seasonality going into the second half? Usually Q2 is the weakest period and Q3 is a bit better and Q4 is... Is that the normal trend that we can expect also in Q3, Q4? Anything else?

This question, historically, and I think going forward, Q2 will still be sort of the weaker quarter in the year. And I guess that's the reason why we were so transparent saying here that we are, yes, we have a strong growth in the quarter. But we, as customers, have chosen early renewals for business on this quarter. 70 million in EBITDA from Q3 to Q2. So when you look at Q3, you should assume that there is sort of 70 million, all things aside, sort of missing compared to historical patterns. And that's why we've been very clear. So Q2 is still probably a weaker quarter all over here. Q3 would have been a stronger quarter if this early renewal haven't happened. If that makes sense.

Yeah, got it. So it's fair to assume an underlying improvement continuing in the second half. And Q3 specifically, we should deduct 70 million from the underlying EBIT that we estimate, right? Okay. And another question on the operating cost for design management. It was roughly 440 million, a bit higher than Q2 last year. Is this something that you see also from an organic basis that cost is increasing a bit, excluding acquisitions and FX?

I think it has to do with what we have also is that this is a sales organization. If we sell more, more commission are being paid as well. And also bonuses. So I think it's more an effect of that. So let's say that we were selling less, then the bonus and commission would have been less. So it's not that the cost structure has been increased. It's more that we have a sales and commission model that makes the cost go up when we sell more and it goes down when we sell less yeah it's connected to this multi-year agreement and the contract timing right Yep. So if we sort of sell more and recognize more. So as we have also the underlying growth, as I pointed out through the EBITDA comparison, it was still growing with 80%. So the bonus and commission goes up. So I think more related to that, we haven't increased that many. If you look at the number of people, for example, that we have reported, you will find that mainly the main cost is the number of people in the organization.

Yeah. Thanks for that clarity. And my final question is on the working capital development. It was negative 196 million in Q2. Was this in line with your expectations? And how should we think about working capital becoming two, three quarters until you have reached the point when you have sort of annualized the payment structure from Autodesk?

Yes, let me answer that. Yes, it was in line with our expectation and we see that the prepayment of the three-year contract that we're talking about that ended in Q1 2023. So following the three-year cycle, the effect will have been outlined in Q1 2026. So we still believe that, or we forecast that we will have SQ4 and then normalized in Q1 2026.

Okay, thanks a lot.

Thanks Mikael.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So thank you all for taking the time for this earnings call and I wish you all a good summer and thank you. Thank you.