Dustin Group AB (publ)

Good morning, everyone, and a warm welcome to the presentation of our second quarter results. My name is Samuel Scott. I'm the group CEO here at Dustin, and with me today, I have our CFO, Julia Lagerqvist. And if we get into the two to report, I'm glad to report yet another quarter with organic growth, strong cash flow, and reduced leverage, while we continue to streamline and improve the efficiency of our operations. Net sales development was positive in the quarter, with organic growth of 4.4%. Growth was driven by strong performance in the public sector and should partly be seen in the light of a strong comparable quarter. The gross margin decreased to 13.2% compared with 13.9% last year, but indicated a sequential improvement compared to the first quarter's margin of 13.1%. The lower margin is mainly explained by mixed effects arising from strong public sector growth and continued price pressure in the Netherlands, also a weak performance within non-standard services that had a negative impact. Adjusted EBITDA was relatively stable at 103 million compared to 110 million a year earlier, where implemented efficiency measures nearly compensated for a lower gross profit. Cash flow from operating activities increased to 258 million compared to 180 million last year, and this is primarily driven by improved net working capital. Leverage measured as net debt to EBITDA dropped to 2.7 times compared to 5.7 times last year, and is now within our target range of two to three times. And if we then turn into some operational highlights for the quarter, We have taken important steps to further sharpen our business, and the discontinuation of the consumer offering is now completed in all markets, which means that we are now fully focused on our business customers. We have also initiated a new sales organization, dividing relation sales between the Nordics and Benelux. By appointing a responsible for relation sales in Benelux, we get more attention and come closer to the customers in the Netherlands, the country where we've had the biggest challenge during the past years. This new organization will also create a stronger local focus in both our regions with better ability to capture local opportunities. To support our continued transformation within services and in the company in general, we have appointed a CTO with a clear mandate to drive both transformation and efficiency improvements. We have also been re-awarded a Cobadis Platinum rating, which further strengthens our position with our customers that have high demands on sustainability. Following weak performance and to accelerate our transformation, we have executed cost-saving initiatives within non-standard services, to better align the cost base with lower volumes, with savings materializing from the third quarter. And with this, I hand over to our CFO, Julia Lagerqvist, to give you some more details on our financials.

Thank you, Samuel. Moving then to page four, we look at our top-line development. And as Samuel just presented, we saw 4% organic growth in the quarter. And I will now break this down somewhat. If you remember, we talked last time about how we, in the last year, shifted sales from Q1 to Q2, just related to the implementation of the new ERP system in Benelux that led to delayed invoicing. This effect corresponds to around 6% of these points in growth headwind in Q2. As we have said, we have fully exceeded our B2C business quarter, and that drove roughly 2% decline in total sales. And that explains most of the negative impact coming from the decline in the S&B segments. On the opposite, we saw strong underlying growth in LCP, mainly related to the public sector and driven by two factors. One, the continued upgrade in the wake of the Windows 11 shift. And two, we saw some custom orders that were brought forward to mitigate expected price increases or more limited availability related to the global component shortage. All in all, this explains the 4% organic growth in the quarter. We now move to page five to look more closely at the LCP segment. And the sales in LCP was 4.1 billion SEC in the quarter, or 5% higher than last year. The granted growth was 10%, so we continue to see a large negative fourth impact from the state and SEC in the quarter. This growth was then on top of a strong Q last year, as this explains. And the growth was mainly driven then by the demand in the public sector and related mainly to continued PC upgrade and customer orders brought forward. From a geographic perspective, it's a strong growth in Sweden, Norway, and Belgium. We also saw positive development in our lifecycle services, where a strong offering has contributed to a new contract as the secretaries partner in Norway and the Swedish municipality in Kalmar. As I said before, we can see large volatility in sales between quarters in LCP. The gross margin decreased versus previous year, but did improve a little bit versus previous quarter. The growing public business contributed to a negative customer mix effect, with the largest share of public customers that normally have lower average margins. In addition, the continued price pressure in the Netherlands was a key driver for lower margins. Increasing take-back had a positive impact on both margin and EBITDA, and we also saw some post-development in our private labor businesses last year. We also saw continued improvement in our cost structure, mainly thanks to the restructuring programs. This had a positive effect on the bottom line. And overall, this led to a segment result of 105 million SEC versus 99 million SEC last year, and also improvements versus Q1 results. The segment margin ended at 2.5% in line with last year. Then we move to the overview of the S&D segment on page 6, where sales landed at 1.3 billion SEC, or 14% below last year. Also here, we saw negative works effects, and excluding this, the decline was 11%. We see some signs of stabilization. Customers remained cautious due to the ongoing economic uncertainty. And we in the quarter exited the D3 business in all our markets, which explains more than half of the decline for the S&D segment. Excluding this effect, the organic sales decline was just above 4%. As explained earlier, this is a strategic move to better focus on our core business, but we always expected some sales headwind coming from this. Looking at the product mix, we saw that the share of software and services sales increased to 13.3% versus 11.6% last year, which was more an effect of declining overall sales than an uptick in software and services. We saw continued decline in our non-standard services as in previous quarters. The gross margin was stable versus previous year. We saw positive improvement in our base hardware business in both Nordic and Benelux, thanks to continued price discipline. but this was offset by lower margins on services driven by the lower volumes on non-standard services with fixed costs. We have implemented cost-saving actions to mitigate these lower margins that we have effected in Q3. The improved cost base from previous cost-saving programs partly protected the segment results, but could not offset the lower volumes and the lower margins in non-standard services. And the segment results landed at 31 million SEC versus 46 million SEC last year. This corresponds to a segment margin of 2.3% versus last year at 3%. Moving then to page 7, you have an overview of the SDV development over time. We have constantly worked with operation efficiency and optimizing of our stores bit by bit. In the last year in Q2, we did a major reorganization with the focus to improve our cost-to-market capabilities, but also to cut costs to match our current market situation. And we removed over 200 O's. Since then, we have continued to reduce our workforce. And as you can see in Q2, we have reduced our total workforce width 226 FTEs, or 10% versus the last quarter, last year. If we prolong the period and look over two years, we have taken up more than 300 FTEs, or a total of 14% of the total FTEs. Looking ahead, we have, as we have said, done additional costs in our non-standard services, so set the defining sales, which was executed at the end of Q2. And we have also initiated further reductions with the aim of saving 80 million SEK yearly, full effect from Q4. so our cost of optimization journey continues in line with our strategic focus. On page 8, we looked at our leverage development. The leverage landed at 2.7 times compared to 5.7 times last year and 3.1 in Q1. We have seen a continuous improvement, driven both by improved results and improved task persistence, as well as in positive forex effects. In addition, we also apply an updated definition of net debt as described in the previous report. which drives 0.2x of a positive effect versus last year. Overall, we are, of course, very happy to see this improvement in leverage after a period of higher levels, and that we are now in line with our target range to be between 2 to 3x. Moving then to cash flow and capex on page 9, we see that the cash flow for the period was plus 172 million sec, which is 89 million sec last year, so a good improvement, also on top of the improvements we saw in the first quarter. Looking at the details, we see that the cash flow from operativities before the change in capital was flat versus last year, and the cash flow from change in capital was positive $169 million, despite an increase in inventory. We will look more at the net running capital on the next slide. But in total, the operating cash flow was plus $258 million in the quarter. Cash flow from financing activities is mainly repayment of leasing debt and at a similar level as previous quarters. Looking at CapEx, we see that the total investment was $92 million, of which $39 affected the cash flow. This is mainly linked to IT development investments and slightly lower than last year. Coming then to page 9 and looking at the network and capital development, we see that network and capital landed at minus $46 million. This is an improvement versus last year, $60 million, and also an improvement versus the previous quarter at $139 million. The accounts receivables declined, supported by active actions to set the receivables, and this was the main driver of the improvement in net earning capital. Inventory increased versus the previous quarter, as expected, partly due to that the previous quarter was quite low due to timing effects, but also as a result of the shortage in memory components putting pressure on inventory levels to secure delivery. But compared to last year, inventory levels were actually declining. We do expect inventory levels to vary in the coming quarters, It's an opportunity to drive sales and margins, as well as the need to secure deliveries in the current market environment with the impact from component shortage. As said before, we always have some timing effects between individual quarters, but a long-term target for national capital remains to be around minus 100 million. And with that, I would hand back the word to Simon.

Thank you, Julia. To summarize the quarter, we report continued organic growth supported by strong development within the public sector and despite meeting a strong comparable quarter and a discontinued consumer business. Gross margin decreased, mainly due to the mixed effects from strong public sector growth and continued price pressure in the Netherlands. The adjusted EBITDA margin was stable since executed efficiency measures compensated for lower gross profit. Cash flow from operations was strong and our leverage decreased and is now within our target range. Moving on to the market outlook. During this quarter, we have seen stabilization in the market, but looking ahead, uncertainty definitely continues. due to the current geopolitical and economical climate, and also the expected continuation of volatility driven by component shortage, where we expect prices to continue to increase, and the potential limited availability on lower and mid-end products. But building on this and looking forward, our focus going forward is very clear. We are driving a set of initiatives aimed at delivering a stronger dustin and profitable growth. We are accelerating the execution of our strategy with a full emphasis on our position as the preferred IT partner for B2B customers. This means working closer with our customers and leverage on our full service offering. At the same time, we're strengthening our local go-to-market execution and performance through the new sales organization. It will increase our ability to capture local market opportunities and being faster at meeting local customer demand. We also continue to accelerate the transformation towards our standardized and scalable service offering, which is key to improving both efficiency and margins over time. In parallel to this, we are taking decisive actions on costs. We're implementing efficiency measures to deliver an annual savings of around 80 million SEK, with full effect on the fourth quarter. And in addition, we're now conducting a full review of our indirect spend to further optimize our costs. And finally, in this current market environment, we remain focused on managing risks but also capturing opportunities and do that supported with our strong customer relations, strong and wide supplier base and relationship, as well as our high deliver capabilities. And with that, we open up for Q&A.