BTS Group AB (publ)

Perfect. Thank you. Hello, dear investors. Thank you for joining. And for those of you I'll see later today, I'm looking forward to the time with you. Let's talk about Q2 2025. No doubt it was absolutely defined by a big problem, right? EBITDA dropped 23 percent in the second quarter. And if you unpack that, you will see that that is due to one issue. That is the operations of BTS North America. And within BTS North America's profit performance, we lost about $36.3 million SEC in the second quarter. Half of that was due to one-time expenses of severance and legal fees associated with the sounding board acquisition and also part of the dropping unfavorable U.S. dollar exchange rate. The other drop was 100% because of the decline in revenue in North America. So what's been done in early June, actually, we did a reorg. So we have a new management team in place in BTS North America. I've gained six new direct reports as a result of that. And about our top 30 partners in the company have switched to their reporting to. We'll talk more about that in just a minute. But Q2 was also defined by something else. We set out this year to get back to double digit growth. And I'm very proud to say that two out of our three units are successfully back to double digit growth. BTS Europe and BTS other markets. Let's go through each one of the markets now in more depth. So BTS North America had negative 4% revenue growth in the second quarter. And our new growth strategy has been fully implemented. Our view on the main reason for the negative 4% growth is an inefficient sales operations. It is true that Trump had an impact on tariffs from early April in the second quarter. It is true that some of our customers went into delays, conservatism. They froze. One of our largest company clients stopped all work. did a 17% reduction in force, and that obviously hurt the team. When we looked back at the second quarter, approximately 12% of the quarter's revenues were pushed out. Over half of that was in the last seven weeks of the quarter. So that is true. On the other hand, it's been three years of unexpected black swan events, and we think the team can do better. And our success in most of the world and Europe show us that it's an internal issue. So we implemented the new team. The new growth strategy is completely implemented. It's starting to go through the company. And I have to tell you, there is a lot of energy. We have more full time sellers in the market. We have more time spent with our customers. We've slowed down anything that's not customer or stopped non-customer facing time. We're prioritizing our core clients, the clients that spend the majority with BTS and where we have the highest win rates. We are putting our AI offering in every single proposal. Not 10%, not 20%, not 30%. 100% of our proposals right now have our AI technology and our AI services embedded. We expect a return to growth in the first half of 2026 as we implement these changes, as they gain traction and momentum, and as we see our win rates coming back to the clip that we're used to. If we jump to BTS Europe, which was a very tough market in the first half of the year, we're super proud of our 31% revenue growth in the second quarter in BTS Europe. I'll remind you all what's behind this. For big competitive global deals coming out of Europe, the team has over a 60% win rate, which is double that of the rest of the company. And so despite the fact that the market remained sluggish, the second quarter was fantastic for them. We did start to see towards the end of the second quarter more sluggish and delays in some of their decision making, but an absolutely fantastic quarter for Team Europe. We still managed to win large contracts. And of course, similar to NAM and across the whole company, we continue to push on early pipeline generation and strengthening our revenue growth culture. BTS Other Markets, second quarter, back to double-digit growth at 19%. Demand has been strong in most of our regions across other markets. Southern Europe, which is part of other markets, has started to recover slowly, which is good news. More financial services from an industry perspective. We've had a lot of win rates in that sector in the second quarter. And the investments in the Middle East and our African operations have been paying off in terms of delivering high growth. So besides looking at BTS Europe and BTS other markets to show us that double-digit growth in a more difficult market is possible, we can also look at our services. And executive coaching shows us that double-digit EBITDA growth is also possible. So our coaching business's profit grew 34% in the second quarter. Their win rates are extraordinarily high. They're experiencing the highest renewal rates in their 12-year history. And the combination of the value proposition for the CEO and the executive team combined with the new technology we acquired from Sounding Board is a winning value proposition. In fact, we purchased Sounding Board in March and it's off to a very strong start. So in terms of statistics from that, the team has won 11 new clients in all three of our geographical markets since the end of March. Three of their accounts have expanded. I want to call out one particular competitive win because this maps to the vision of why we acquired Sounding Board. We wanted to be chosen as the global coaching provider of choice. So you could coach all leaders from the CEO to the front line. And our clients can also use the technology platform for their own internal coaching and mentoring needs. So we won very large biotech Nordic company that's in 70 countries. And we just won as coaching provider of choice. So we're very proud of that. If you look at just a snapshot of the units, you can see here what I've already been saying in terms of the growth and the EBITDA performance. But bottom line is strong organic growth in two out of the three markets. BTS Europe's margin has a particularly nice bump from 11.3% to 14.4%. Business mix was favorable. They were able to execute it with less external contractors, hence the margin. And BTS other markets, we saw the demand picking up in most of the markets. APG, which is a very small unit in BTS North America, they act as a reseller of some of our products, not all of them, really was hit by the overall kind of malaise in the U.S. market in the second quarter. So their customers reduced project scopes. They tried to do things in-house and or they delayed. Let's talk about AI in terms of keeping BTS competitive in the market and our AI services, and then we'll look at our gains in terms of productivity and productivity going forward. So I think this is an enormous opportunity for us. And I am deeply energized by our advancements, by the success of the Wonderway acquisition in the first 12 months, the creativity and the tinkering that I'm seeing across 24 countries, and the win rates as a result of embedding AI in all of our proposals. And I'll just take a step back for a second. From a market opportunity, I think it's huge. There's always going to be consulting firms that are going to implement big company tech. That's not BTS. There's going to be other firms that are going to recommend a change in business model. We are the only firm who's going to reflect their new strategy, their A.I. strategy. Right. The new talent model in an organization that's happening because of the use of the new A.I. tools. We can reflect the new ways of working and we can make it deeply personal, which is the core value proposition of BTS for the last 40 years. We have clients asking us now to be their, what they said is their Accenture in terms of implementing their own look at how to create AI-based tools and simulations and drive adoption across the organization. So it's a very exciting time for us. To meet that market demand, we're doing a few things. First of all, in the first bullet here, you'll see the revenue associated with our AI-related adoption services, so training on the AI tools. Next step maturity, getting adoption by business unit or function team after team. So our revenue growth here has grown 425% versus the same period last year. We have $8 million in bookings. It's absolutely just the beginning. We are also launching three new core services to help our clients further adopt and get the lift from the AI tools that they want their teams to use. The other way to look at this is our own AI platforms and the subscription revenue that we are getting from them. In the first 12 months of this offering, we're at $3 million in bookings, and we've had 100% growth from Q1 and Q2. The really interesting thing about the Wonderway AI conversational bot is that we're sticking it in our simulations for big sales kickoffs and large offsites and simulations. And the usage of that inside the simulation is driving scaled adoption and self-service subscription models on the platform. And the subscription offer was launched in May. So fast growth here right now, big market potential and a lot of energy internally in the firm on the tools that we have. If you think about then AI in terms of a productivity improvements, we've been doing quite a lot of things and quite proud of this. So we can look at it both from the AI impact and our other automation initiatives impact. And the bottom line here is we announced our phase one, which was five million dollars in employee savings, which mainly hit in the second quarter in terms of the severance costs. We'll start to see the lift from that already in Q3, Q4 and obviously next year. But if overall in the first half of the year, you'll see a 7% decline in the total number of core BTS employees. Obviously the acquisitions have added people on top of that. We are on track with our phase one, $5 million in savings. We see further AI adoption, not just within our consulting teams, but across the operational functions at a clip that we have not seen previously, which we all find very exciting. We can see in the workflows of the operational functions, the prompts and the GPTs that they're custom building to improve the efficiency of every step along the way. And our simulation team continues to experiment on different vibe coding platforms that have very strategic potential for us in terms of how quickly, how large our teams would be in developing those and value for the clients. In terms of automation, we have one major initiative. It's one of the reasons we bought Sounding Board is to migrate BTS's coaching clients onto their technology with their operational teams. And that is one quarter delay, but on track where we expect the majority of the impact to impact us in 2026 and a little bit in 2027. So Q2 was tough, and it was tough for one reason, which was North America. Our competitiveness remains strong. The market is enormous and growing from my perspective. I'm very proud of our fast AI advancements. The team is energized, and we're starting to see the win rates and the pipeline pick up again in North America. So you have come to appreciate BTS as a story of long-term profitable growth year after year. You can expect that of us moving forward. We're proud of our historical performance, and I'm excited about the opportunities that AI is going to have for us, both internally and externally, over the next three to five years. We'll continue to have a stable and growing dividend that you've also come to expect. And, of course, given the poor Q2 performance, we changed our outlook. It's been lowered. The result is expected to be worse than in 2024. And looking forward to answering your questions. Do you want to start with some written ones?

Yeah. Hello and good morning. Michael Wallin here, head of investor relations. While we're waiting for calls or questions from the conference call, we'll take some sent by email, and we have a few here. The first one is rather long, and it deals with the outlook for 2025. Elaborate more on how you reason around the outlook for 2025. Adjusted EBITDA for the one-off costs of 14 million in first half is around 158 million in first half, only slightly lower than 169 million for first half 2024. How big cost savings is coming in during the second half of this year? And U.S. is meeting more easy comps. Is it reasonable then to assume that adjusted EBITDA for 2025 can meet the same levels as in 2024? Well, we've given our outlook, but maybe we can talk a little bit about what the outlook is based around or...

If I'm understanding the question, they're wondering if it's going to be better than what we're saying. Is that what they're saying? Yeah. What's the chance of it being the same as last year, even though we just believed it's going to be worse than? Yeah. Right? I mean— My job is to be as accurate as possible in the moment and not have to have swings that are unexpected on a regular basis. Obviously, we're fighting with everything we've had to make up for the drop in the second quarter. Right. And to get North America back to a healthy growth clip. You know, I took over North America in 2016 after they had five years of very low single-digit growth and profit decline. And in that moment, it took me three quarters to turn it around and get it back to double-digit growth quarter over quarter for the next three years. So I am confident that we will do it. What we are mentioning is we think that will be in the first half. Right. And North America is a big company. And so if they can't get back to a double digit growth clip in Q3 and Q4, yes, we have the cost savings starting to come out due to the severance in the second quarter. But our estimate right now is as accurate as it can be.