BTS Group AB (publ)

Good morning, everyone. My name is Richard Engberg, and I'm an equity research analyst here at Eric Penzer Bank. With me, I have Henrik Ekeland, CEO of BTS, to present a quite unique and challenging quarter for BTS. Henrik, the stage is yours.

Thank you very much, and thank you, everyone, for listening in to this presentation of the second quarter. As you will see, the numbers do not look pretty. It's been many, many years that we delivered such low profit numbers, although they are profit. However, our focus, which I will explain, is on succeeding in the long term. We have during 18 years at the Stock Exchange delivered significant continuous profit improvements. Profit has doubled or is 20-fold during those years. And our focus during this quarter has been on making the moves so that we can continue to grow profit going forward after the crisis. So let me tell you the story. It's been quite a dramatic quarter, very dramatic. With the pandemic, all physical deliveries of training has ended. You can see that in all parts of the education sector. Every university in the U.S., for example, is closed except one single, thousands of universities. No physical deliveries have happened. And this has led to 70% of the revenues disappearing for the whole quarter overnight. Quite a dramatic situation. Now we moved early and said let's refocus, let's convert our clients into virtual and digital solutions instead. This way we can save a lot of revenue and we can make an important move forward towards the digital and virtual world where we're all heading. And we have actually compensated for more than half of the lost revenues by this move. And since March 1st, when we started this plan, we have won over $70 million in new digital and virtual business. And this is really what has made it possible for us to get to a profit during the second quarter. What we also have done is to change the focus of our sales force. If you look at the market, it's quite different. There are some industries, for example, tech and pharma, and also to some extent, financial services, a few others that are still strong and still investing. There are also some areas where companies continue to invest. And we have moved our sales resources towards those more promising sectors. We've also reduced costs. Obviously, one option in such a tough market is to reduce personnel. We have chosen not to do that. We have a very efficient organization with great people, and that's the organization that has delivered 20-fold increase in profit over 18 years. We don't want to demount that. We want to keep that organization. Instead, we have saved on some volume-related costs. We've saved on subcontractors and on some expenses. And in total, we are happy to report that we are actually delivering a profit. despite being in a very, very tough industry. And starting the quarter with 70% less revenue, we have, through digital and virtual, and through selected savings, achieved true profit. And so, even though the numbers don't look pretty, we have made the right moves for the long term. Our focus now is long-term. We want to continue our very strong track record of growing the profit significantly, many years. And once we're out of this crisis, because we will come out of this crisis just the way we have come out of all other crises for many, many, many years. How can we be stronger? That's what we're looking at. The first thing we are working on is to grow the customer base. So we are now, through marketing and sales, taking in many new customers. They are not so big when they come in, these are tougher times, but we are getting a foothold into those new customers. Also, we are working very hard to maintain relationships with existing customers, also the ones that are not buying. So our plan is that once we're out of the crisis, we would have many more customers. This is a good time to take customers because it's the time of change where customers actually are willing to rethink who they work with. When we started this year, we were very focused on physical deliveries. As we now move forward, we have physical plus virtual and digital. We've increased our capabilities there. So we have a bigger overall offering. Finally, a stronger organization and keeping our people is key to that. But we are also recruiting a top talent. Right now is the time to find the top talent. And by combining a bigger customer base, a larger total offering and a stronger organization we are confident that we will get to a situation with a larger revenue base and a larger profit once we move out of the crisis and this is our main focus for sure we are working on creating a profit also this year absolutely but the main focus is to deliver growing profit to our shareholders after the crisis, which are higher than the ones we had in 2019. If we then look at the actual numbers for the first half, we've seen a 20% decline in revenue and a 76% decline in the EBITDA number and bigger declines as we go lower down. If we look at the regions, we can see that we have had the biggest drop in other markets. And that is really because they came first into the crisis in markets such as Italy and in Asia and so on. And also because it's been a little bit slower, quite significantly slower, to convert clients in these markets to the digital and virtual solutions. That has worked better in Europe, and in particular in North America. If we then look at the second quarter, we see that revenue decline is faster, which is quite normal. We had two good months, two very strong months in January and February. Then we had a tough March and also tough April, May and June. However, as we write in the report, we've seen the market improve towards the end of the second quarter. And during the third quarter, we see that the market is improving and we expect that improvement to continue. So what is really what's the background behind that? Well, physical deliveries are not back. Physical deliveries will not come back. until we have a solution so that people can meet again. But what we see is that clients that before said, let's wait, perhaps physical deliveries will come back. They are now seeing that for their important projects, they have to move and they have to go virtual and digital. So that movement is creating an improvement in the market. And since we have a strong position in digital and virtual, that trend is providing an advantage for BTS. And as we can see here in the Q2, what I told you about the regions actually is the same for the Q2, with North America doing better and other markets having the toughest time. We have built up our cash position significantly. As you can see, we have 600 million roughly in cash. One year ago, we had 200 million. So we see this as important. In a time of crisis, you want to have financial flexibility. for security reasons, but also to be able to make the investments, potential acquisitions and moves that come up typically during a crisis such as this. So we have very, very strong financial position and we're super happy about that. Just looking at this long term, and I think that's very important. It's easy in a crisis that suddenly everything looks negative and everything is gloomy, but we've been there before. And we've seen the same thing that the feeling of being gloomy that we have during the crisis will go away because we come back to normal times. That's a pattern we've been into for 200 years. And for sure that pattern will happen also here. We will come out of this crisis. And these three main drivers on this slide that are behind the fact that we have 20-folded our profit since we came to the market are still there. We have a very strong position in a market that is huge and that is growing. We're global, we're virtual, we're digital, we're physical. We have top clients. That's a very, very strong position. And if I look at the moves my competitors are making, which is more focused on cutting personnel and making shorter moves, That tells me that we will be even stronger competitively after this crisis. And so the strong position remains and we'll be stronger when we move into a more normal world. Now looking at the second half, as I mentioned, we have seen the market improve during the end of the Q2. and early Q3, and that is true for all regions. And as I said, what is happening is that clients that were waiting and wondering Will physical come back? How will the crisis turn out? They've had the time to now set their plans. And our clients, the biggest companies of the world, they're not standing still. They are thinking long term. And they all have important strategic projects. They all have important training. And they're not standing still. So now they're moving forward. And they're moving forward with virtual and digital. And we are strong there. That's the background to the improved market position. Again, shareholder position, not a big change since the last time. So thank you for listening and welcome any questions from the moderator or the audience.

So thank you, Henrik. And I will start with this question. Is recovery that you see in the later part of the quarter and the start of Q3 related to any specific geographic market or industry, or is it a general recovery as a whole?