BTS Group AB (publ)

Welcome to BTS Group Q1 Report 2025. During the question and answer session, participants are able to ask questions by dialing pound T5 on the cell phone keypad. Now we'll hand the conference over to CEO Jessica Skåne. Please go ahead.

Thank you very much. Hello, everybody. I hope everyone's having a nice morning so far. First quarter 2025. For us, we can summarize the first quarter by basically stability. A stable first quarter despite the macroeconomic volatility. Major revenue contributions across the firm were coming from. The rebound continues in BTS Europe, actually reaching double digit 10% growth in the first quarter. The sounding board coaching platform acquisition we announced at the last earnings call is off to a really strong start. Our AI solutions, about three quarters ago, we brought in a tech startup called Wonderway and their conversational AI practice bots before, during, and after those pivotal moments and difficult conversations is global. It's in over 40 of our clients, 40 or 50 clients now globally. They've hit two million in bookings and it's off to a very strong positive start. And then we made the acquisition SEAC in Thailand in Southeast Asia. And not only did that contribute positively to our revenue growth in the first quarter, but they also have a very strong sales pipeline. I think the first quarter was also marked appropriately so by us redirecting some of our sales efforts to focus on the companies and the industries that we believe would continue to invest despite the volatility and overall conservatism fears. So that's what Q1 is marked by. If we look to BTS Europe, the rebound continued that we started to experience in the fourth quarter. And this is due to large contract wins. In fact, on that note, for the win rate of going after nuclear and the heavy competitive RFP situations, our win rates have improved from about 35% on average to over 60% in the last four months. We won a lot of large work and large deals last year, and those continue to be executed. None of those have been delayed. We continue to have high pipeline sales, pipeline volume with a strong win rate that I mentioned. And of course, there's been some companies who are starting to show some conservatism or wanting to start projects a month later and so forth, but this has nicely balanced those delays. We see strong growth for us with the exception of Germany in the first quarter. Overall net sales increased 10%. Profit is from 9.8 to 14.3 million SEC. And EBITDA margin improved from 9.6 to 12.6%. Obviously, BTS Europe's moves that they made in the last six quarters are on removing the low performers. increasing their productivity, high billability, good management of external contractors, and even lower office expenses all contributed to the bigger margin. Let's turn to our biggest market now, BTS North America. Of course, there's some increased uncertainty that we're feeling around the economic policy and the shifts and potential tariffs and so forth. I would say that our customers trend towards the cautious and conservatism that's continuing, although many companies in the first quarter also just ran the course. I would say we're starting to see a bit more increase in conservatism now, more so than we experienced in the first quarter. Of course, we spent time thinking and talking to our customers and seeing their thoughts on potential recession or tariff fears and what they're going to do about it. And, of course, we're focusing on the places where we believe we'll be less impacted, like pharma, bio, utilities, healthcare, U.S.-based manufacturing, and so forth. We continue to increase investments in sales, bringing AI as fast as we can across our services and portfolio, and spending as much time as possible with customers being creative long-term. BTS Other Markets. Their first quarter felt a lot like the fourth quarter in a way, but the acquired company SEAC continued a strong performance with a healthy pipeline. The recovery remains slow, both in Spain and China for us. One of the things that sometimes hurts BTS other markets is if the big global deals generated out of North America and Europe slow down, which is what happened to them in the first quarter. On the bright, well, one more thing that hurt them is early holidays in the Middle East. This year slowed down some of the volume there, but it's picking back up. On the bright side, we had some several key, very strategic, big projects, being one in our Australian office, Asia, and Southern Europe, which for BTS Other Markets is some of the biggest deal sizes we've closed historically. And there's three of them. And so that's building one. I will say BTS Other Markets is expected to pick up growth as we move forward. An exciting news was we made an acquisition of a really cool company in Sao Paulo, Brazil. So it's almost a bringing together of equals in terms of size of the business there. And they focus on culture and culture change. They also spend most of their time working with CEOs and CEOs teams doing definitional culture work. And they're very excited to join BTS because we have the scaled behavior change services to support the definitional work. There's a team is over 20 of them. So in addition to culture transformation, they do leadership development, employee value proposition, and innovative culture and vision alignment. They're currently about 2.1 million US dollars in revenue. and they have a strong portfolio of both local and multinational clients in the Brazilian market. So we are thrilled to join forces with the Nexo team. And if you look over at overall revenue performance and profit performance of the three markets, we have BTS North America, which only grew 3% in the first quarter. I'd say one of the reasons behind the margin drop from 10.7 to 9.8 was we had... acquisition-related costs, legal fees, and so forth of the sounding board deal in the first quarter. And because the growth of our coaching business, so the executive coaching and overall coaching business requires us to use externals, those expenses are going up while we don't have enough work for the full-time people at only 3% growth. So that affected the EBITDA margins. BTS Europe, we already talked about, double-digit growth, great second quarter in a row in terms of the rebound and wonderful improvement in terms of EBITDA margin. BTS other markets at 2% growth, primarily thanks to the SEAC acquisition with margin of 7% versus 7.5. And then we have APG shrinking about 9% and a drop in margin as well. And just one thought there on APG is just overall change in revenue mix. Their buyers are buying smaller average deals and reduced customer commitments just due to the nervousness of the market in the States. So something exciting as well is in the last four months, I would say we've taken the next step towards maturity of overall AI adoption across the 22 markets. countries. It's no longer kind of just grassroots and experiments and all of that, but we've put in a major operation called Operation Archimedes. where all the consultants on all new projects are using prompts and have an AI advisor supporting them so that they can learn the absolute latest and best prompts from any office around the world. And it's having a big impact. I would say for sure people have more joy in the work because of AI, but we just did a big global survey and on average, our consultants are saying it's saving them four hours a week, which if that's the average is quite significant. And it's not just the consultants. We're also seeing pretty significant productivity gains from our software engineers, our operations people, the folks that work in help desk and so forth. And then on top of that, because we purchased sounding board primarily not just for their global coaches, but also for their absolutely fantastic tech platform. I can honestly say feedback from big multinational companies right now is telling us it's the best coaching platform on the market. which is wonderful feedback to get. But we're starting to migrate our existing work over to their operations team in tech because they're 8x more efficient than we are. And so we will start to see those savings in overall maintenance, OpEx, and SG&A over the next three quarters. So for this, I would call it phase one of productivity gains due to the automation of moving work over to sounding board and the internal adoption of really cool prompts And AI is, for this first phase, we have line of sight of $5 million in cost savings that will start to benefit us in the third quarter, the fourth quarter, and then it will be fully realized through the first quarter of 2026. And with that, I'll leave you with the slide you're used to seeing quarter after quarter, but we continue to be very proud of being the story of the long-term profitable growth year after year. It feels good to provide stability despite what's happening in the market. And you can see here's our overall performance since we went public in 2001. Our average growth is 12% CAGR and the average EBITDA growth is 15% per year. We also have stable and growing dividends since our IPO, and the dividend for 2024 is 6.1 sec. And the goal is to distribute 40 to 65 percent of profit after tax in the long run. Finally, in terms of our outlook for 2025, the outlook remains unchanged. So we continue to believe that our result EBITDA will be better than in 2024. And we will say that we say that with some reservations about the currency developments given the current uncertainty and volatility surrounding the U.S. dollar. And with that, dear investors, I will turn it over to you for questions.

Thanks. The first question is from Daniel Torsson from ABG Sandal Collier. Please go ahead. Your line is open.