Addnode Group AB (publ)

Welcome to the presentation of Adnode Group's Interim Report January to September 2025. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the CEO Johan Andersen and CFO Christina Elfstrom-McIntosh. Please go ahead.

Hello everyone and welcome to the presentation of the Interim Report for the third quarter of 2025 with Adnall Group. I'm the CEO of Adnall Group and I also have with me our CFO Kristina Esler-McIntosh who will help me out today. Looking at the agenda, we will spend some time on Adnall Group, look into Q3, talk about the divisions, spend some time on the financials and the balance sheet and then we will open up for Q&A. So, Adnord Group. Our purpose is all about inclusion for a better society. We operate, acquire and develop entrepreneurial companies that provide digital solutions. For innovation and continuous development in close collaboration with our customers, we create digital solutions for specific needs. The software and digital solutions that we provide are used 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 also responsibility for rules and regulations. Our digital solutions make all this possible. Talking about Our third quarter, before we go into the highlights, there are a few things that we're going to discuss earlier. But the highlights first, we can see that we have a stable market. We had a high rate of acquisition activity and improved efficiency. Our EBITDA, if we adjust for the early contract renewals that we already disclosed in the second quarter, where we had a positive effect of that, now we have the negative effect of 70 million. If we... add that back to the result, you will find that our EBITDA was 290 million compared to 200, so an increase in underlying results. We have published new financial targets that will confirm our existing strategy, and it sets also more ambitious aims in terms of growth and profitability. We have done six acquisitions, and SolidCAD, the biggest one, is expected to contribute to EBITDA with 120 million. We have also extended our credit facilities on more favorable terms to support our future growth. So when we look at our highlights Q3 2025 from a financial perspective, there are a few things that we would like to add as well. For those of you who have followed us for a longer period, you know that we had a year with new transaction model for partner software and reclassification of third party agreements. This has benefited our business, but the changes have made it more difficult to follow our performance of net sales. In this presentation, we will compare our performance with pro forma figures that have been adjusted to reflect a scenario in which the new transaction model for partner software and reclassification of third-party agreements have been in place already in 2024. This is the same pro forma that we present at the Capital Markets Day and that you also can see in our interim reports. The good news is that this is the last quarter that we have to compare with a performer to better evaluate our performance. When we present Q4 2025 and compare it with Q4 2024, it will be like for like. Starting this quarter, we are also presenting distribution of net sales on our own software, third party software and services. So with that as an introduction, let's look at the financials for Q3. As I already mentioned, looking at EBITDA adjusted for early contract renewals increased to 290 million. But you can see the EBITDA 149 million, you add the 70 and then we end up with 219 to compare with 200. And as previously communicated, as I discussed, a number of the three-year deals that would normally have been renewed in the third quarter were renewed early in the second quarter. These early contract renewals increased EBITDA in Q2 with the 70 million that I mentioned, but it has reduced EBITDA by the corresponding amount in this third quarter. However, the net impact over the year is neutral. Looking at the market trend, we have a stable business in Nordic countries, UK and the US. The German market, however, remains weak. We are still in a position where we don't have push from our customers. We have to work with our customers to make things happen. Our business model with 60% recurring revenue is a strong foundation for our business. And if you're able to look to the right, you can see that we're still on a five years progression or having a significant growth. So to sum up, it's a stable quarter. We have done a lot of acquisitions and we can see that the market is quite stable in the areas where we are. So with that as an introduction to the Q3 result, let's move to the things that we have done in the quarter as well. And one of the things that we have done is that we have held our first capital market day, at which we present the new financial targets that confirm Anna Group's existing strategy and set more ambitious aims in terms of growth and profitability. The new targets are that we will have an average annual EBITDA growth that will amount to at least 15%. That corresponds to that we will double our EBITDA every fifth year. The dividend margin should be at least 17% every year. Net debt shall not exceed 2.5 times our EBITDA. We have an unchanged dividend policy. To achieve our financial targets, we are now pursuing a plan consisting of an increased focus on business development, clearer prioritization of investments in our digital solutions, more measures to improve our internal efficiency, and we increase our capacity to make value-creating acquisitions. So acquisitions. We have announced nine acquisitions so far in 2025, which are expected to contribute total annual net sales of approximately 700 million, and it will strengthen our EBITDA margin. In the third quarter, The closed acquisition of Jelis in Norway, whose net sales for 2024 amounted to approximately 165 million. Jelis offers a no-code platform for case management and business applications. The company is now part of the process management division from Q3 and has strengthened our position as a leading player in mission-critical case management systems in the Nordic region. The acquisition of the Dassault Systèmes partner Extended Solutions with a net sales in 2024 roughly around 40 million will strengthen Teknia's offering to the Nordic manufacturing and defense industry and increase the market position. This transaction is subject to conditions and is expected to close in Q4 2025. In Q3, we have also done more acquisitions, and the three you can see on this slide is acquisitions that will strengthen Symmetry in the division's design management. Symmetry has successfully grown organically and by acquiring and integrating other Autodesk partners, supported by a strong portfolio of proprietary software and professional services. And during the third quarter, we announced several acquisitions for Symmetry, FS Solution is the fastest growing platinum partner in Brazil, providing an entry to the dynamic Brazilian market. SolidCAD is the largest Autodesk platinum partner and the market leader in Canada and is expected to contribute with an EBITDA of 120 million. We expect to close this transaction in Q4 2025. FS Solution is already included in Q3. We also made two asset deals of customer basis in the Q3 that is recognized as part of Symmetry in Q3. The combined net sales of these acquisitions to Symmetry are expected to amount to approximately 420 million. These acquisitions together strengthen Symmetry's global footprint, provide a platform for further growth in North America and Latin America, and will contribute to increased profitability and margins. We still have several active acquisition process underway and acquisition are an important part of AdnoGrowth's growth strategy and our ability to reach our financial targets. So with that, as an introduction to Q3, we'll later come back to our divisions. I would like to hand over to Christina to introduce our new credit facilities.

Thank you, Johan. And as we announced now in October this week, we have refinanced our current existing credit structure, which consists of two parts. We have a term loan, which was increased from 1 billion to 1.7 billion. We also have a revolving credit facility, previously at 1.6 billion, which is now 2 billion. And we also announced that this refinancing was conducted in a more favorable interest terms. And these two loans, the term loan and the RCF, has a tenor of three years with an extension of one plus one possibilities. We're also very pleased to announce that the Swedish Export Credit Corporation, SECO, has joined the current bank club. which consisted of Nordea and SEB in the past. And also this extension of accredited facilities supports our growth plan going forward. And I'm going to hand back to Johan.

Thank you, Kristina. So, Enro Group, three divisions, design management for our lifecycle management and process management. Now you see the distribution of net sales, gross profit and our share of EBITDA. in the three divisions. So looking more in detail to design management. Similarly, the biggest company in the division noted stable demand in Brazil, US, and UK from customers in the infrastructure, construction, and manufacturing industries. In the northern countries, demand from the manufacturing industry was somewhat weaker. The other two companies in the division SWG and Trivia deliver stable earnings performance compared with year-early period. EBITDA decreased to 51 million compared to 118, but having adjusted for the 70 million related to the early renewals Autodesk contract that was moved to Q2, the adjusted EBITDA of 121 million was in line with EBITDA in Q3 last year. Doing the same adjustment for net sales, we see that the net sales in Q3 were in line with the same quarter last year. The division's acquisition in US and Brazil has been successfully integrated into the division's operations and contributed to earnings according to plan. Look at product lifecycle management. Sales of PLM systems and related services showed a stable trend in the UK, Nordics and the US, where we have a broad customer base spanning manufacturing, defense and life science industries. Sales to the strategically important aviation and defense segment remain strong during the quarter. The market situation in Germany remains challenging. EBITDA increased to 42 million compared to 39. And the EBITDA margin increased to 9.7% compared to 8.3% last year. The measures implemented to adapt the organization and cost structure, which were communicated in the first quarter, have proceeded as planned and had a positive impact on earnings in the third quarter. And that meant that EBITDA increased by 8% year on year. The trend towards customers' increased issues in fixed-term leasing models rather than licenses with perpetual rights of use remains firm and this continues. Process management division delivered yet another strong quarter with growth and an improved EBITDA margin. The division's net sales increased by 24% and EBITDA by 34%. This marks the fifth consecutive quarter in which the division's EBITDA margin improved year on year. EBITDA margin increased to 21.8% in this quarter compared to 20.1% last year. EBITDA was positively impacted by price adjustments, increased operational efficiency and contributions from acquired companies. The acquisitions, of which Jens was the largest, have been successfully integrated into the division's operations and are contributing earnings according to plan. And the climate for the division remained unchanged. We can see stable demand for case management, the geographic information system for the public sector compared to last quarter. So with that as an introduction to our business and our division, I will hand over to Kristina, our CFO, who will walk us through the cash flow and the balance sheet.

Thank you, Johan. I'm going to go through the cash flow for the quarter. And you can see here from operations that we have improved the cash flow from operations. from minus 133 last year to minus 64 million SEK in this quarter. We can also see that the main impact was the changes in working capital, that we are still affected by the changes of the payment terms for out-of-desk three-year contracts. And we have already communicated this earlier, and also highlighted this effect in our capital market day. And it's just to rephrase what that is all about is that until 2023 for Autodesk payments, we received the full three years payments from customers upfront. That changed in 2023 and we are now receiving only one year at the time. So we have a temporary working capital drag And we can also see that the impact of the cash flow is gradually decreasing and we expect it to normalize by the second half of 2026. Looking at the cash flow from the investment activities of 615, mainly relating to the acquisitions that we have done, also an earn-out payment was made during the quarter. And from the cash flow from financing activities in the quarter amounted to 298 in comparison to minus 25 in the past quarter. And that is mainly relating to new loans drawn for the acquisitions. Also have a small impact on the leasing of minus 27 million SEK. And then we're going to go and just look at the highlight of the consolidated financial positions. And I would just like to highlight a few areas in the consolidated balance sheet. And just please pay attention that this is the operational balance sheet and not the balance sheet presented in our report. And we continue to operate supported by a resilient balance sheet. It's important foundation for continued growth organically and through acquisitions. The increase in the balance sheet since the beginning of the year is primarily driven by the acquisitions, which have contributed approximately 600 million SEK in intangible assets and goodwill. And it mainly derives from the acquisition of Genus and FF solution. Provision taxes and other liabilities remain at approximately the same level as in December. And included here are the provisions for earn-out and other liabilities to sellers. Approximately 505 million SEK in total, of which earn-outs are 440 million. Net debt has increased to 1.9 billion SEK. And the increase is by 866 million SEK is mainly for the new loans for acquisitions. And the cash position amounts to 339 million SEK compared to 441 last year. Equity ratio amounts to a solid 31% as of September. And return of capital employed has decreased slightly to 17% from 18% in the previous year, driven by higher base on relating to acquisition. And as of September, we had a total available facilities in the RCF of 1.6 billion. and approximately 1.3 billion was unused at that time. And as already explained, we had refinances in October, which we communicated, and the facilities have increased after. And I would also like just to explain a little bit more about the cash generation and what has happened during the year. And our business model, is characterized by an asset like operations with moderate working capital and R&D requirements. We have strong cash generation supported by upfront payments. But you can see in this graph, which we also presented at the capital market day over the past decade, that cash conversion, which is based on the free cash flow in relation to EBITDA, has come down after 2023. We used to be at around 70% cash conversion, and you can see a temporary drop, which is related to the drag of payment terms, mainly from Autodesk, when the payments in the past were done all the three years in advance. But I would also like to emphasize that we're not losing cash. It's a temporary working capital drag. And the impact on this cash flow is expected to normalize in the second half of 2026, which I previously also mentioned. And we also believe that we are now at the low point of the U-turn, which you can see in this graph. And I'm going to hand over back to Johan now.

Thank you, Christina. I want to end with a follow-up compared to our financial targets. If you remember, we are now EBITDA growth expected of 15%, EBITDA margin of 70%. So I believe we are delivering on our growth strategy where we combine organic growth with value-creating acquisitions. If we go all the way back to 2015, you would see that we had an EBITDA of 168 million, and today we are rolling 12-month EBITDA in Q3 of 854 million. That means that for the last 10 years, the compound annual growth rate of our EBITDA has been 18%, and we have moved EBITDA margin from 9.6 to 14.9%. Our financial targets now is to grow EBITDA with 15% year-on-year, meaning that we will continue to double EBITDA every fifth year. Part of this is that we aim to move our EBITDA margin to 17% from the almost 15% that we are today. The acquisitions that we have announced lately will add to the EBITDA growth and our expansion of EBITDA margins. There is good demand for the business and mission critical digital solutions that we deliver to our customers in various industries, including construction and property, infrastructure, manufacturing, defense, aviation, life science, and the public sector in both Europe and the US. The economic and geopolitical situation remains uncertain, which is primarily affecting our customers' decision-making processes regarding major transformation investments. The market situation is considered, from our perspective, stable for most of the group's business, although some regions and industrial segments may take a few more quarters to recover. Our business model with a large proportion of recurring revenue is a source for security in more uncertain times. So with that, I would like to open up for Q&A.

If 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 Thomas Nielsen from Nordia. Please go ahead.

Thank you for taking my question. When it comes to the process life management division, what is your current thinking on the German auto industry? Will it be stabilizing? And could you perhaps talk a bit more about the effects from the cost-saving initiatives as the division is performing clearly better with a 10% EBITDA margin now in Q3?

Thank you, Thomas. I understand product lifecycle management we're discussing. And regarding the market in... Germany, I think we are all trying to figure out when or how that will transform. We can see there are a lot of initiative from both government and REIT to sort of let funding drips out into the market. We haven't seen the effect of that yet. So if it's going to be the next quarter or a quarter of that or in 2026, we don't know. But as we mentioned, we are planning to make sure that we are able to make a healthy margin even in this market where we have today, that we can see the effect of that in the cost reductions that we have done over this year. And they are playing out well in Q3 here, but we haven't seen the full effect of the cost efficiencies yet. So there are some more that we can sort of see hopefully in Q4 as well on that. So with regards to the market, we are making sure that we can be efficient in existing market conditions. When will the turnaround be in Germany? I think your guess is as good as mine on that subject.

Okay, thank you very much, Johan.

The next question comes from Erik Larsen from SEB. Please go ahead.

Thank you. I'll take my questions one by one. If we start on design, If we adjust for the 70 million in Q2, you grew EBITDA by 17% year-on-year. And if we do the same here in Q3, you grow EBITDA by 3%. So it looks like a slowdown. Clearly, it's a lot of moving parts here. But has anything changed in the market or is something there that could explain the difference?

No, it's not a slowdown if you sort of look at the growth. We have the high growth here. in reported in Q2 or then in Q3. So that's not a thing. The effect is more that we have a variation in our renewal, underlying renewals of the subscriptions. I think that's more due to the effect. So like we mentioned, the only way we can see a little bit of slower market now, or if it's probably related to, we still don't know, we can see how the slower market in the manufacturing part in Nordic If you look at the U.S. and the U.K., it was still an okay market. In the U.S., we can see that things like the construction of data center is affecting a slower residential market. Data center is more, they use our software to design it, but everything that goes in the data center as well for coding and etc., So there are, and if you add that together, the market is roughly the same. So it's not a slowdown from 10% to 3%. It's more a variation between the quarter.

All right. And then on cash flows, you talked about it here just at the end, how you expect the cash flows to trend the coming year or two, but just to zoom in on the near term here, Q3 is usually a seasonally week. The Q4 is, usually a big or rather good cash flow quarter. So are there any reasons why this should not be the case in Q4? Kind of the balance between what's going on for the past year and the normal Q4, so to say.

Yes, thank you, Erik. I think you're quite spot on that Q4 is normally a quarter where you have a strong cash flow. And at the same time, Q3 is normally the lowest cash flow from operation quarter. And we still have the prepayments made for some of our major customers made in Q4. So we still expect that to be the same case. But as mentioned, the cash flow will have this temporary drag effect from the working capital through 2026 as well. Q2 and Q1. And then in the last two quarters in 2026, we will see the positive effect. That's our expectation.

Okay, that's helpful. And just a final question on the back of the cash flow here. You're doing quite a lot of M&A recently. How do you think about acquisitions going forward the coming quarters here? Will you be a bit more cautious or restrictive given the balance sheet, etc.? ?

I think this, from our perspective, we usually say that we are not opportunistic in what we would like to buy, but we are optimistic about the timing because most of the acquisitions are from entrepreneurs. And when they are ready to go, we need to be there. So that hasn't changed. Having said that, we, like I said, I think we added acquisitions today with a net sales combined of 700 million. And we are doing our biggest acquisitions so far with regards to earning capacity of SolidCAD. So we probably need just a few months just to handle those. But that's more from an operational perspective. You need to bring them in. You need to make sure that they sort of get integrated in the things we want to do. We're still very much decentralized, but there are things that when you're into a new group. So I think it's more compared to that. So we are still looking at bigger acquisitions. We are now bringing on board the biggest one. So we're probably not expecting a bigger acquisition from that perspective. They have sort of one, two quarters coming here, but we're still looking at acquisitions.

Okay. Thank you very much. That's all from me.

Thank you, Eric.

The next question comes from Frederick Lithell from Handelsbanken. Please go ahead.

Thank you and thank you for taking my questions as well. I had two maybe, Johan, if you could talk a little bit on the last comment you had on acquisitions. Have you seen a trend that valuations have sort of come down a little bit for you? Is that making a sort of tailwind for you in terms of those negotiations would be interesting. And then also, statistics, ABI statistics from the US have been a little bit slow or weak. Is that something that you can relate to on pockets of your customers or is it something that you don't really see anything from? Thank you.

We start with valuations. Now, I can't really say that there are so much changes in valuation. What we can see is that the sort of the companies In a wider market perspective, the information memorandums being sent from corporate finance sort of guys are probably a bit less right now. It might be that that's a trend we can see, but we are much more focused on bilaterals or discussions going out to partners that we have been working with or the competition that we are. So that sourcing is still existing. And we are... quite prudent on our valuation sort of metrics. So it might be that it's a hard question to ask, are the valuation going down or not? And this is a very more, the private market is not as quick as the stock market to reflect changes in the world around us. So the prices are usually the same, but the available companies can go up and down compared to anyone who wants to sell to those prices. It's like when you are thinking about selling your own house and you have an idea about how much your house is worth. And even though your neighbor is selling at the less price, you sort of think that your price is still worth the same price like it was two years ago. And then you probably wait a year to sell it instead. So that's probably those sort of dynamics that we see in the M&A market where we act. Okay. And then we had a question about statistical macro data from the US. And yes, we can see, for example, the residential market in the US is not a growing market. But on the other hand, we can see that, for example, we have a lot of customers who are building all the new data centers being in use when they're going to harness the power of AI. So that means that those customers, they want to design it, they want to build it, and then they need also help with services with regards to BIM coordinators, the guys who are going to handle all the big complex digital models that are going to come out of it, and also the guys who are delivering all the cooling systems into the data centers need to be part of that. So you have sort of Yes, residential market not growing in the U.S., but if you look at that type of infrastructure data growing and the mix of that is the reason why we can say it's still a stable market for us.

Okay, perfect. Thank you. Very clear. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. The next question comes from Fredrik Nielsen from Red Eye. Please go ahead.

Fredrik Nielsen from Red Eye. Okay, one more question. Thank you. Yes, thank you. I thought I was in the queue, but apparently I wasn't. Sorry for that. Fredrik Nielsen But now you are, so please go ahead. Yeah, yeah. Regarding process and demand from larger authorities for larger projects, I note a slightly more positive wording. I think you changed it in the last report, actually, but I noticed this time. I mean, is that correct? And is that something that could have a positive impact on growth over the next two quarters?

If you look at it also, I think it's a combination saying that we are now also more active in Norway with the JNUs and they have so I think the combination, so it's not that we are saying that we have a much more positive market in Sweden. It's still a, we have a market there and we are working with our customers but we can't beyond we can't say that we have a much higher degrees of tenders available that we can sort of deliver on that that's not the effect in the but i think it's more an effect that we are also adding more in norway so it means that we can build if any a little bit more positive on the whole great that that's clear and and regarding the lower demand from nordic manufacturing customers

Could you just remind us of what kind of customers design management has within that industry in the Nordics?

It's a combination of both customers who are both using sort of design software. You will find it's a mix of reflecting the industries in the Nordic countries. It means that you will find the OEMs and you will find the big manufacturing companies and they are using the software both for design things but also for keeping, have a good definition of all the product data management. So all the data being created when they're doing design. So I think our customer base here reflects the customers mainly in what you will find in discrete manufacturing and then the neighboring OEMs around that. So there's the customer base. And as I mentioned, we have probably a little bit of a fewer the scope of the projects, because we have services as well to handle the product data is probably a little bit less and that has an effect on it. So that's when we're saying less demand. So the scope of the projects of integration and services when handling all this product data that they create in the design phase. So it goes back to the major customers a little bit hesitant to do bigger transformation projects. So it relates to that. It's not a new trend, but we can see that we also have that trend among our customers. On the other side, if you look at the process division, no, sorry, product lifecycle division, they can see that they are having a growth in the discrete manufacturing area this year. So it could be that it's an effect of our sort of customer base right there. So it's a mixture. So it's not that sort of a big decrease, but we can see that we're doing less with existing customers in design management in manufacturing in Nordics.

if that makes sense. Okay, I see. Great. That's all for me. Thank you very much.

Thank you, Fredrik. Any more questions?

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

We have one more.

The next question comes from Daniel Thorsen from ABG Sundahl Collier. Please go ahead.

yes thank you very much understood it was in the final second here of the q a i missed part of the call due to some coinciding calls here but i have a question on the cash flow i heard christina's responses here on the operating cash flow but at least to my expectations the investing cash flow was also a bit higher than i thought excluding mna so intangible and tangible assets did you comment that did you say why should we expect this level going forward

from investing activities. Yeah, yeah, yeah, it's it was also, apart from the new acquisitions that we made, it was also, you know, the earn our payments for micro desk that we've been talking about before.

Yeah, but I was thinking about the CapEx.

We have done the assets deal in the US, which are included in that number.

Okay, so should we see this level as a good proxy going forward then? Or is it like the elevator this quarter?

Yeah, it is increased by approximately 60 million SEK relating to the assets.

Okay, 60 million up because it's up like 80 million year over year or so. So we should expect that to come down in Q4 already?

Yes, unless we do other assets deals that we have not communicated. But you should look at the level as in before.

Yes, okay, very clear. Thank you, that's all. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. 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 listening in today and very good questions as well. So with that, we will close the presentation and keep on moving with Q4.

Thank you.