B3 Consulting Group AB (publ)

Hi, welcome to today's broadcast. You are with us, B3 Consulting Group. If you want to ask questions, just go to the second formularium on the right of the broadcast. And with that, I would like to give the floor to Katarina Lundqvist, Communications Manager at B3, who will be moderating this conference. Please, Katarina.

Thank you very much for that and a warm welcome to this presentation of BT Consulting Group's third quarter of 2024. My name is Katarina Lundqvist and I work with communication and IT here at BT and I will immediately hand over to our CEO Martin Stenström. And with us in the program today we also have Rafal Dabkowski who is the CEO of our subsidiary in Poland who will give a presentation of the Polish business. Just like always, we will have a question time at the end of the broadcast. So it's great to send questions, just like you heard in the beginning, via the form. Or you can also email us directly at ir at b3.se. And later today, we will also publish a subtitled version of this presentation on our webpage. With that said, I'll hand it over to Martin Stenström.

Thank you so much, Katarina. Yes, my name is Martin Stenström. I'm from Brutgaard and it sounds ambitious since this is the second time I have this annual report for us. I usually start with a bit of a cultural picture, and that's how I am today. I would like to tell you a bit about the culture at B3. The most important thing here is that the culture is formed primarily by employees. but also by our vision to be the best consulting company for employees, customers and owners in that field. Since we are the best workplace, we will attract the best employees, and then we will deliver best to our customers, who will buy more from us, which guarantees high profitability and value development for our owners. So there is the overarching vision that a nice chain is connected. And today I decided to pick up some of the things we see in the pictures here. And then we have two zebras, as you can see. This is something that gradually has become a part of our culture, and it has a clear explanation. Just as B3 highlights diversity as a core value, the pattern is unique for each zebra. So we think it symbolizes our culture in a very good way. But now I would like to hand over the floor to our CEO of our Polish subsidiary, and therefore switch to English. Rafal, now it's time for your presentation. I want to welcome you here. And so I switch slide to your presentation.

Okay, thank you, Martin. Good morning, ladies and gentlemen. As Martin said, my name is Rafal Dabkowski. and I'm co-founder and CEO of a wonderful company, B3 Consulting Poland. As you know, B3 Consulting Group has become a majority owner of our entity two months ago, and this creates more opportunities for both players, including our employees and clients. Together, we are stronger. So let me start with some facts about our country, Poland. The next slide, please. So we've been the EU member for 20 years already. It helped the country to grow its economy with an average GDP level of 4.2% since we joined EU. The market in Poland still keeps growing and it creates many new jobs in various industries. An IT sector is more and more important with the growing number of IT specialists. Thanks to lower labor costs, well-educated and competent people, and also high working ethic, Poland has become an attractive place for foreign investments and companies. The next one, please. We just closed the Q3 2024. And despite the market circumstances, we managed to grow in Q3 with a positive EBITDA of 14%, which is a very good level in an IT consulting sector in Poland. Our total number of employees is 226. That includes our consultants and also our employees in the operation team. To give you a wider look on B3 Poland, here is our journey from number of consultants and revenue perspectives. All our employees are based in Poland and we run projects in seven different markets. Over 80% of our customers come from cold calling campaigns, including big international enterprises. And some of them you can see below the graphs. Our business is the people business. So our main strengths are acquiring customers and recruiting talented consultants. It is possible only thanks to the right people in our operation team. The right people is just one of two important factors. The second one is disciplined way of working. We developed a model which refers to a rocket. And this machine is built with thousands of parts, but to simplify it, there are three main levels. The guidance system, control system and engines. And we use it to define company goals on top than particular team goals and roles with activities. Thanks to this approach, we improve awareness, engagement and efficiency. Everyone in our company knows where we are going and how this person contributes to company's development. We are the group of ambitious people And we aim high. We want to be also different from our competitors. We want to live the quality of IT consulting services in Poland, thanks to our care tree model, which maximize potential of our employees and gives more valuable and more suitable solutions to our clients. We also want to improve our efficiency thanks to well-structured core functions like business development, talent acquisition, marketing, finance, and other, which will be the booster for our internal growth and also startups. We call it B3 Super Hub. And also we want to keep a good level of profitability thanks to a sustainable growth of revenue. Thank you very much for listening.

I hope to see you soon. Thank you, Rafal. Very, always very good to hear from you. Can we go back to the Q3 report? I have three things I want to focus on today, and then I hope that you take more from this drawing. The first is that the growth is back, and it will become even stronger in Q4. Our degree of debate continues to improve. And thirdly, our operational efficiency is quickly developing for the better. I will of course talk a little more about this later on. Som förväntat var Q3 ett svagt kvartal, men positivt är att vi har tillväxt igen. Våra intäkter blev då 245 miljoner, vilket är en tillväxt på nästan 10%. Men det starkt bidraget detta var ju förvärvet av Webstep, som är en stor bidragsgivare till tillväxten. Och exklusive blev det en svag negativ tillväxt på 0,5%. Låt oss kalla den ingen tillväxt alls helt enkelt. Vår EBITDA blev 10,6 miljoner eller 4,3 procent. Resultatet belastas av engångskostnader relaterade till förvärv och avveckling av websteppskontor i Stockholm på 6,6 miljoner. Kan man ha med sig. Vi har ju då pratat om Polen och antalet medarbetare inklusive Polen som jag väljer att fokusera på är 869 vilket är en ökning från 799. Och man ska då ta med sig att ända i september så var vi över 1000 anställda. But the market is still challenging, but despite that, we have landed several new businesses. And as mentioned earlier, we are now back in the growth track. Our operational efficiency is now improved with several things that are going in the right direction. We have had a cost program that we call Hedgehog. We are ending it now. It has been successful. It lowers our costs by 41 million per year. And we have also improved the cost level in dotter companies, which will give full effect under Q2 2025. The integration of our acquisition of Webstep has developed better than expected and faster, and our degree of debut is on the rise and we have broken the previous downward trend. Here we have a matig page, you can not go through it row by row, but I have some comments. You can look at year-to-year-to-date compared to last year. Then we are still in a decrease. But the gap has decreased compared to before. So I see it as a positive effect. Then in the turquoise screen we have a description of how we can have such a high result after tax. And it's a bookkeeping technical thing. Det beror på att vi nu har konsulterat in Betre Poland som ett dotterbolag och då har vi enligt med IFRS omvärderat bolaget och detta har skapat en positiv effekt på 77 miljoner men som inte påverkar kassaflödet. Det påverkar ju också vinst per aktie. Det är säkert så att ni har reagerat på det och kanske redan har läst det i delårsrapporten. Now we will talk a little bit about Webstep. As I said, in connection with the acquisition of Webstep in the Q2 report, it is a company that has had low profitability for a long time, and just as expected, the result for Webstep for Q3 is weak. But on the positive side, we can note that the integration with B3 is faster than expected, so the Webstep acquisition develops as a whole better than expected. Vi har en låg personalomsättning i Webstep, vi har en högre debiteringsgrad och högre timpris i Webstep än i B3s motsvarande verksamheter. Det är väldigt positivt. Vi har också fått några snabba synergier genom en minskning av totalt tre stycken FTE i motorbolagsfunktioner, där vi har hittat effektiviseringar. Webstep har då flyttat in i vårt Stockholm-kontor och vi har då tagit kostnaden för avvecklingen av kontoret som en engångspost i Q3, vilket jag berättade på förra bilden. Decisions on further measures will lead to synergies with lower costs and higher efficiency, and they are planned to be carried out under Q4. These measures will have full effect on VW's profitability and it will be a level with B3 under Q1 2025. So here we follow our plan, it goes a little faster than planned actually. Yes, here we have the picture that shows what makes the difference in revenue between Q3 2024 versus Q3 2023. And as you can see, we have a clear negative effect of the fact that we have reduced FTE consultants. And that mostly depends on the fact that we have recruited less in a tougher market. The biggest positive effect is, as expected, the acquisition of Webstep, but also the consolidation of BT Polen contributes a lot to this. As for the degree of debiting, we see a decrease of 1.5% in Q3 2023 vs Q3 2024. But we can see that the gap is decreasing between these different quarters of the year that we have had all the time during the year. And now, if we include Betterpolen and Webstep in this calculation, it has even become positive. Decreases between Q2 and Q3 are due to seasonal variations, which is normal for a consulting company. And as I said earlier, we can also note that Webstep and even Polen are stronger in their behavior than B3, which will strengthen us as a company now that they have become fully consolidated. This picture describes our subsidiaries and how they perform. We showed it last time and earlier as well. These are the figures for year-to-date September. As you can see, there is still a big difference between the companies, since the companies work on different markets with different conditions. But in general, the company moves in the right direction towards higher profitability and growth. Many companies deliver strongly despite challenging markets, which primarily is the company we call M7. It is a concept borrowed from the American stock exchange. It describes the big tech giants. We use it to describe the seven best companies in B3. They are still up there in the upper right corner, but there are challenges. There are companies that are approaching, so we'll see how we do next year with the M7 list. In addition to M7, we have companies that are in the middle. They have normal problems with a slow market. and they will improve as the market improves, and our cost programs in our subsidiaries will improve. Then we have some companies that have underperformed, and we have developed recovery programs for them to come back on track in the near future, and that will of course have a positive impact on the company's results in the future. Our cost savings program has delivered even more than the original target, We lower our costs by 41 million per year. Now there are no more measures to be taken and we therefore close the program. Our focus is to sell and increase revenues. But at the same time, we continue to follow the initiative we started in Q2 to get lower costs in our subsidiaries. This program started with a preventive cost creep. We predicted when revenues were going to fall in some companies. This program goes as expected with the majority of the companies on track, but in some companies we still need to make more measures to get into balance. And this is what we have in these plans, which means that we will get the effect of it next year. Yes, as I said, we have landed a lot of big and important businesses, both on new and existing customers. Here is a selection of them. Vi har fått en jättekul affär med att hjälpa en medlemsorganisation att göra en bättre medlemsskapsförvaltning med hjälp av Microsoft Dynamics. Det är en stor och viktig affär för oss. Vi har tagit flera nya affärer inom Sitevision, webutvecklingen bland annat på Eskilstuna och Linköpings kommun. Vi har fått en intressant och börjat leverera en affär, ett stort teamprojekt för en ledande svensk bank. And then we have also done an interesting AI solution for Trafikverket, where we help them build an automated system for rail maintenance and increased safety based on AI. And then we have successors in Sweden's regions with several new tasks, first and foremost Gävleborg. The rest that can be mentioned that has gone home to Q3. We have been assigned to this year's employer branding company, which highlights the strong company culture in B3. Our head of People and Culture, Pernilla Brolin, will be the head of HR this year. We have then completed the acquisition of Webstep and consulted in BtP. We have also had the third company in Sweden to be named Sitevision Platinum Partner, which is fun and strengthens our presence on the Sitevision market. And we continue to work a lot with AI and we have done a number of activities, including organizing a B3 arena in Malmö with focus on AI. We have taken many new missions. We have arranged AI hackathons and we continue to share knowledge within the company and with our customers. And more about that will come. To summarize the Q3 report, we now see a clear picture of growth back. The market is still challenging, but we have still taken many nice and important business. And three things I want you to remember. We are back in the growth track. We are quickly improving our operational efficiency, which consists of our acquisition of Webster on a better level. Our debiting rate has improved and our cost programs have delivered. And as a last point, we expect a strong growth and increased solvency in Q4. That was all, so now we are at the time for questions. Are there any questions?

Ja, vi har fått in många frågor. Tack snälla för det. Och vi kommer ta en liten mixad frågestund nu på både svenska och engelska. Försöka täcka så många frågor som möjligt. Men är det så att du tycker att du inte får svar på din fråga så går det jättebra att också mejla till oss efteråt på ir.bt.se. And I will also take this in English. We will have like a mixed Q&A session now with questions both in Swedish and in English. And you are very welcome to also send you an email afterwards if you don't get your answers here. So let's start with some Swedish questions for Martin. You mentioned in your introduction that the market situation is still tough. Do you see any signs that the market has dropped? And how does the customer discussion feel before 2021?

Vi tar första delfrågan. Har marknaden bottnat ut? För oss, för vår del, för V3 har den absolut gjort det. Men det är inte så att vi ser en markant mycket högre efterfrågan, utan det är fortfarande en utmanande marknad, men den har bottnat ut. And the second question was, a short reminder.

How are the customer discussions going now before 2025?

Yes, the customer discussions are also a very mixed and diversified dialogue. As you know, the entire consulting industry has had this so-called crew law to handle, which customers handle in very, very different ways. A number of customers see this as not a problem, and some are very consistent with canceling their consultants who have been there for two years, which means that we have to replace them with other consultants. There are many customers who have that thing. Then I think it's very industry-specific. There are parts of the market that are still going very badly, and some that are going very, very well. And for our part, it's about working with those customers who have möjligheter att växa nästa år med bra budgetar som vill satsa på IT. Det är vår lösning. Man får helt enkelt leta på rätt ställe.

And the revenues went down the first nine months of 2024. They decreased by 6.4% compared to the same period in 2023. How do you plan to reverse this decline and regain growth?

Yes, as you have seen, we have seen that we have gained growth by buying companies like Webstep and consulting in Poland. But if we think about it, as I said, we have now placed our cost savings program in history. Now it is fully focused on increasing revenues. And we do that through sales activities. All of our companies have a lot of sales activities. We are out talking to customers, finding businesses. So now it is focused on sales, sales, sales. That is how we work with it.

And you have talked about the Webstep acquisition. Do you consider the acquisition as successful and is it planned for more acquisitions in the future?

Yes, I feel that the Webstep acquisition is very successful. I hope that we think that when we are done too, but the integration is better than expected. I think this will be great. We are absolutely eager for more acquisitions and we are looking forward to it when there are opportunities. So yes, the answer is yes to that question.

And another question about Webstep. We write in the report that Webstep should have a profitability in line with better companies. In the beginning of 2025, what is the level for B3 companies and how do you see taking Webstep there?

Yes, then it will be a bit of a non-answer to the question, because we are not leaving any forecasts for next year. We have a long-term EBIT goal of 10%, we have that. But what we say is that Webstep should have the same level as B3's leading company. We will do that and we will achieve that under Q1 2025, we are convinced of that. The main business in Webstep is very good. Then they have had an overhead problem.

And another question related to financial goals. Can you tell us how you see the financial situation now in relation to the financial goals?

Yes, we have a very strong financial position. As you know, we took up an obligation this summer. It strengthened our cash flow very well, so we feel very confident with that and keep us within all our goals.

Okay, so let's switch to English now and we have some questions about the Polish market, Rafal. And the first question is, is the Polish market still strong?

Is the Polish market still strong, right? That's correct. From the numbers point of view, you could see on the previous slides that the GDP grew last year, grows this year and still keeps positive trend. Big investments from foreign investors and companies in Poland gives more and more opportunities and IT sector becomes more and more important as I mentioned before. So this is a competitive market, fast-growing market with plenty of opportunities. So I would say that this is a strong situation that we are facing right now, despite the fact that there are always challenges. But there is no, from our perspective, good or bad market. There is always an opportunity. It's matter of finding this and adapting to the situation.

And what is your current competitive landscape? How does it look like? Who are your main competitors?

You know, there are many companies, foreign companies and Polish companies with different size from 50 people, employees up to even six or seven thousand employees who directly compete with us in the customers. So there are many of them, but from the numbers point of view, there is no single report that really defines IT consulting firms. We also use an outsourcing phrase in Poland, and this is a little bit wider than just consulting. So we have consulting companies in there. We have companies with the offshore, new shore services. We have companies who outsource processes, not just consultants. So there are companies like SII, a French company. There's 7N, a Scandinavian company. Imagine, another Scandinavian company. Billenium, Brightnet, Polish companies. There are many names that we compete every day with.

Yeah. And what would you say is your current market share? Can you see there's a potential to increase it?

As I said, it's difficult to say. There's no single report that we could base on. But there are over 700,000 IT specialists in Poland right now. We are just a small part of it. As you know, we're below 200. there are still many opportunities to grow in various areas and various industries.

Great. And you have had a great growth thing start. What do you say is the secret recipe behind your success?

That's a very good question. I always hear this question and very often hear this question. There is no one single recipe. There are many ingredients and many aspects starting from the right people then having discipline actions and activities and also ability to adapt because we are a consulting company we know how to talk to people ask questions and react on the needs and we also trust in care philosophy, which means that we are there before the need arises. So adaptation these days is one of the most important aspects that we believe in and will help us to grow with all the other elements that we have implemented and we still improve in our company.

Thank you, Rafal. And we have another question in English, but I think it's mentioned for Martin, for the whole group. Do you see organic capacity increases going forward?

Yeah, yeah, yeah. Try to translate this question to myself. Of course, we have still a lot of organic growth to achieve. In this report, we talk a lot of the WebSTEP and the Poland Consulate, but we are still upside in the organic growth. We are not satisfied with the utilization rate, which will be higher.

Yeah. And some questions in Swedish that have come in. And Betio has previously been strong within startups and started many companies. What does that business look like right now? Are there more in the pipeline?

Yes, in the pipeline we have ongoing work to find and attract entrepreneurs. So there are always some in the pipeline. Then it is a process that takes a few months for us and them to agree that this is a good idea to start a company together. And many of the majority of these will never be anything, but maybe one in five will be something. So the answer is yes, we have it in the pipeline. We don't have an actual start right now, this quarter, but who knows, maybe we'll have it next quarter.

How is it with recruitment now? We've talked about that before. Is it easy to recruit now? Do we have active recruitment? How do you think in that area?

Yes, that's the case. Since the market is slow, it's also slow for people to get new jobs. It's been a long time since it's been so easy to recruit. So it's a fantastic opportunity, of course, for companies like us, which are attractive and can attract good staff. Of course, we don't want to rush into a recruitment, we want to match this with the demand. So what we do now is that we make sure to talk to a lot of people, make sure that we are top of mind with them. So when we feel that we dare and want to recruit harder, we can take them in. But we will now, in general, increase our reporting pace before 2025, absolutely.

Good. I think we have covered most of the questions that have come in. But as I mentioned earlier, you are very welcome to email us at ira1bt.se. If you have more questions or if you have not answered, we will answer them during the day. Så med det Martin, det börjar bli dags att runda av.

Ja, tack så väldigt mycket för att ni har lyssnat. Jag hoppas att ni fick med er vårt budskap. Nu är vi tillbaka på tillväxtspåret och vi ser ju ändå trots allt ganska positivt på framtiden. Men tack så mycket för det och så hörs vi väl om ett kvartal igen.