Dustin Group AB (publ)

Welcome to the Dustin Q3 presentation for 2026. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the CEO, Samuel Scott, and CFO, Julia Lagerquist. Please begin your meeting.

Thank you, and good morning, everyone, and welcome to Dustin's presentation of our third quarter results. My name is Samuel, and I'm joined here today by our CFO, Julia Lagerqvist, and together we will take you through the highlights of the quarter before we open up for questions. I'm pleased to report yet another quarter with organic growth, improved margins, strong cash flow, and reduced leverage, while continuing to sharpen our commercial focus and the efficiency of our operations. Net sales development was positive in the quarter, with organic growth of 2.6%, Growth WAS DRIVEN BY CONTINUED STRONG PERFORMANCE FROM THE PUBLIC SECTOR AND SUPPORTED BY ORDERS BROUGHT FORWARD TO SECURE PRICING AND AVAILABILITY IN THE LIGHT OF THE COMPONENT SHORTAGE. THE GROWTH MARGIN INCREASED TO 14.4% COMPARED WITH 13.4% LAST YEAR AND IS ALSO A SEQUENTIAL IMPROVEMENT COMPARED TO THE SECOND QUARTER. THE HIGHER MARGIN IS MAINLY EXPLAINED BY HIGHER MARKET PRICING AND IMPROVEMENTS WITHIN LARGE CORPORATES AND PUBLIC. Adjusted EBITDA improved to 118 million compared to 72 million a year ago, explained by the stronger gross margin and earlier incremental efficiency measures. The margin increased to 2.3% compared to 1.4% last year. Cash flow from operating activities increased to 259 million compared to minus 139 million last year. This is primarily driven by improved networking capital. Leverage measured as net debt to EDITA dropped to 2.3 times and is now well within our target range of 2 to 3 times and significantly improved compared to 4.1 times last year. Turning then to operational highlights for the quarter. During the quarter, we completed several important initiatives that strengthened both our commercial ability and financial performance. First, we completed implementation of our new sales organization. Regional leadership is now fully in place across the Nordics and Benelux, including the appointment of Anne Nielesson as EVP Relations Sales Benelux and member of Dustin's group management team. The new organization and stronger local leadership bring us closer to our customers and partners and create better conditions to deliver customer value and profitable growth. Second, We have completed efficiency measures announced last quarter. These measures are expected to deliver annual savings of approximately 80 million SEK with the full run rate effect expected from the fourth quarter. We also took an important strategic step by defining a clear exit plan for our non-standardized services business. This supports our continued transformation towards our standardized service offering And as a part of this, we recognized an 800 million SEK non-cash impairment during the quarter. On the balance sheet, targeted efforts to improve systems and processes to reduce trade receivances in Benelux have paid off, and the receivable levels have now returned to a normalized level, contributing to stronger cash flow and lower leverage. Finally, we're pleased to receive several important partner awards during the quarter from NVIDIA, Dell, and HPE, And these recognitions reinforce our strong market position and demonstrate the value we create together with our partners. And by this, I hand over to our CFO, Julia, to give you some more details on our results and financials.

Thank you, Daniel. If we then move to page four, we will look more closely at the LCP segment, the large corporate and public. And the sales in LCP was 4.0 billion SEC in the quarter, or 8.1% higher than last year. The organic growth was also 8.1%, so basically no forex effect this quarter. The growth was mainly driven by increased demand in the public sector, leading to larger roll-ups, and also customer orders brought forward in the light of the memory component shortage and customers wanting to secure volumes. From a geographic perspective, it was strong growth in Sweden and Belgium, driven then by the larger roll-ups in the public sector. We also saw growing demand within our lifecycle services offerings. As said before, we can see some large volatility in sales between the quarters in LCP. The gross margin improved versus previous year and versus previous quarter, which is of course encouraging to see. The margin benefited from higher market prices, coupled with a slightly more selective approach to new businesses. In addition, the margin was also supported by a more mature contract portfolio in Belgium, where we allowed to have low initial margins on new frame agreements. The improved profitability in take-back also had a positive impact on margin and EBITDA. The growing volumes and margins led to segment results of $170 million versus $63 million last year, and the segment margin ended at 2.9% versus 1.7% last year. We then moved to the overview of the S&D segment on page 5, where sales landed at $1.2 billion thick, or 11.7% below last year. The granite growth was at minus 11.9%, so very little forex effect. Adjusted for the exit from B2C, the organic growth was minus 5.3%. As explained earlier, this is a strategic move to better focus on our core business, and we always expected some sales headwind coming from this. We see some signs of stabilization, but customers remain cautious due to the ongoing economic uncertainty. Looking at the business development, the hardware and software business in the Nordics developed positively and remains a key focus area going forward for us. The growth model improved versus previous year, supported again by the higher market prices and a continued strong price discipline. This was partly set by weak performance in the non-standard services, which was a burden to profitability, even though it is some improvement versus previous quarter. Improved cost base from efficiency measures partly protected the segment result, but could not fully offset the lower volumes and weak performance in non-standard services. And the segment result landed at 34 million SEC versus 37 million SEC last year. This corresponded to a segment margin of 2.8% versus 2.7% last year. We have now established a clear exit plan for our non-standard services, as Samuel explained, and we begin to execute. This cleanup plan has also led to an impairment of the CBD segment of 800 million SEK carried out in this quarter. The impairment has no cash impact. Moving then to look at the cash flow on slide 6, we see that cash flow for the period was plus 167 million SEK versus a little bit over a billion last year, where last year it was then impacted by the completed new rights issue. Looking at the details, we can see that cash flow from operating activities was plus 259 music, a clear improvement versus last year, and driven by both improved operational results as well as targeted work on tax management and also improvement in networking capital. I will talk more about networking capital on the next slide. Cash flow from investing activities was minus 40 million SEK and mainly related to development of different IT platforms. And the cash flow from financing activities was at normal level and mainly linked to leasing. Our last year was impacted again and by the completed new right issue. The combination of the improved operation results and improved cash flow led to further improved leverage, now at 2.3 times and well within the target range today between 2 to 3. Overall, we are, of course, very proud of the cash development due to date versus the poor development last year. Coming then to page 7, looking at the networking capital, we see that networking capital landed at 182 million SEK, an improvement versus last year where we were at plus 261 million SEK. And inventory increased this quarter, roughly 44 million versus last year, and this was expected and part of managing the ongoing shortage in memory components. putting pressure on inventory levels to make sure we can deliver. Account receivables and opposite decreased, driven by, as Samuel has talked about, continued active efforts to settle receivables from previous periods. In addition, we had some positive timing effects of receivables at the end of the quarter, which all in all led to this positive development of the lettering captain. We note that Q4 is usually seasonally weaker in terms of lettering captain levels due to timing of large rollers at the end of the quarter, driving higher receivables. And as I said before, we will always have some of these timing effects between quarters, but our long-term target for international capital remains to be around minus 100 million SEK. And with that, I would hand back the words to Samuel.

Thank you, Julia. To summarize the quarter, we report continued organic growth supported by strong development within the public sector. Gross margin increase supported by higher market pricing and improvements within the large corporate and public sector. The adjusted EBITDA margin increased, benefiting from the gross margin improvement and earlier performed efficiency measures. Cash flow from operations was strong and our leverage decreased well within our target range. If we then turn to the market outlook, component shortages remain a key factor in the market. These have already resulted in higher pricing and limitations in supply, and we expect both higher prices, And then looking ahead. Our priorities remain very clear. We've made progress and are beginning to see effects on the organizational and strategic initiatives we've initiated. The focus is now to continue our execution, improving profitability and delivering sustainable growth. First, we will continue to build on our position as a trusted IT partner for B2B customers. The new sales organization and regional leadership are now fully in place and our priority is to leverage this to strengthen our local go-to-market execution and improve commercial performance. At the same time, we will continue to execute on our transformation of our services portfolio. We have defined a clear exit plan for our non-standard services and will accelerate the transition towards our standardized service offering, where we see strong customer demand and attractive margins. In parallel to this, we will develop the SMB business going forward through a more focused approach on the services and customer segments where we see the strongest potential. Besides improving our commercial execution, efficiency remains an important priority. Following the completed cost measures, we will finalize our review of indirect spend to further improve our cost base and operational efficiency going forward. Finally, While the market environment remains somewhat uncertain due to component shortages and pricing dynamics, we are well positioned to support our customers through our strong supply relationships, high delivery capabilities, and broad product availability. We believe we're on the right path. While there is still a lot more work ahead, our priorities are clear, and we remain fully focused on building a new, stronger Dustin by executing our strategy, improving profitability, and delivering sustainable long-term growth. And with that, we conclude the presentation and open up for Q&A.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Jesper Segemo from Handelsbanken. Please go ahead.

Yes, good morning, Samuel and Julia. I hope you can hear me.

Yes, we can.

Okay, great. So I have a few questions here, if I may. So beginning with LCP, we saw 8% organic growth. How much was price relative to volume in this growth number?

It's a bit hard to say exactly what's driving the different factors, but I would say the larger part is still volume-related, coming from these larger roll-ups, and a much smaller part is from the pricing increases in that sense. If you look at the big picture, of course, we have had, as you all know, large pricing changes in the market in general, but that's the way that we have split it up.

So you think that you still have benefit from price increases going forward in this segment?

You mean for the following quarters?

Yeah, although as you mentioned that you said it was uncertain, but I was thinking that you said the pre-buying and volumes and the left from pricing, so shouldn't that mean that you have some more benefit on pricing them?

There is, of course, some benefit of pricing, but if we look at the results in the quarter, I mean, the majority of the growth and also the gross margin improvements come from volume is the majority. We had some really good rollouts and sales. And then from a margin perspective, of course, pricing is a part of it, but it's also that we have been a bit more prudent given the uncertainty in the market on pricing and on the deals we take. And we've also had an improvement in Belgium where we had very new customer contracts last year and now are at a more normalized level from a contract and margin perspective. So those are the main explanations.

Okay. Thank you for the clarification. And if we look at hardware in the SMB, it fell 7% year-on-year, and then I guess it's mostly volume-driven here as well then.

Yes. I mean, of course, here you can see a bit more pricing on the smaller customers, I would say. But it's also volume driven.

Okay. And on the pre-buying effect, do you have an estimate how much it was in the quarter? Like three, four percent of the growth or, yeah?

I mean, we talked about this last quarter as well, and then we said we saw pre-buying in there roughly 200 million. I think in this quarter we have seen pre-buying of roughly, I would say, around 300 million. It's, of course, very hard to say. I mean, as I talked to you about LCP before, volumes can move between the quarters, but these are the volumes that we have identified as clear pre-buying linked to pricing.

Okay, thanks. One last question from my side. When do you expect the non-standardized services to be fully phased out? How much of that is the percentage of sales related to non-standardized services? And what kind of margin do you have on these contracts versus the standardized?

Yeah, so we're expecting full phased out to take roughly a maximum two years. And it's a minor part of the full managed services portfolio. And it's today an area where we're not making money. So with this fully phased out, we definitely foresee an improvement in profitability going forward. Okay, thank you.

The next question comes from Thomas Nielsen from Nordia. Please go ahead.

Thank you for taking my question. I wonder if you can talk a bit about the long-term target for margins in SMB. You still have a 6.5% long-term margin, and we saw a 2.8% margin in SMB this quarter. After exiting non-standardized services, what are the key levers to rebuild margins and what timeframe do you view as realistic for margins in the SMB segment to get near to your long-term target?

In terms of long-term targets, it's obviously the board that aligns and approves on what the long-term target is. is for Dustin, and we have the management work towards those ones. Obviously, as you point out, at the moment, we're quite far away from our long-term target, and we have a journey to go there, specifically on the SMB side, I would say. Maybe, Simon, you want to add a bit more on what you want to do?

Yes. So if we look into the different buckets of our SMB business, if we start with the services part, as we've said, we've now taken a strategic decision to fully focus on our standardized portfolio where we see good customer demand and where the margins are attractive and where we have good profitability already today in that business. But with that decision also comes the clear exit plan on the non-standard services. which will take up to two years to get fully out of and then we expect clear profitability improvements of that. So growth in the managed services in the standard portfolio coupled with completely exiting the non-standard is one lever. The other one is, if we look at the Nordic hardware software business, there we are starting to see underlying improvements, and this is something we will fuel and continue to work with, because here we have a very strong position and a very strong online engine and brand. So that is one aspect. And the third aspect is, if we look into the Benelux and specifically Netherlands, where we will take a slightly different approach going forward. and not focus at all at the smallest B2B customers, but rather go after the opportunity we see in mid-sized, the slightly larger-sized companies, which also plays much better to the local strength and the local positioning we have at Dustin in that market. So those are the three main areas we work with going forward.

Okay, thank you. Perhaps one final question for me. The gross margin in Q3 was 14.4%. Do you view this as a sustainable level? You saw some benefits from higher pricing and also maturing Belgian contract portfolio. What effects did you see in Q3 that were structural and which may be temporary that helped lift the gross margin?

I mean, you point out, I mean, obviously the price increases were not those benefits will not go on forever, so those I say are a little bit more temporary. The Belgium one, hopefully that will at least during the contract period for these bigger framework contracts be a bit more stable now. But of course, that can always change. I mean, we have contracts coming and going all the time. But for those specific areas, I would say that the contract maturity in Belgium is hopefully a bit more stable, and the other one is a bit more temporary.

Okay, okay. And with your balance sheet now much stronger, what do you think in terms of your capital allocation now that leverage is down to 2.3 times EBITDA? Should we expect further deleveraging, perhaps resumed M&A, or dividends once profitability stabilizes in Dustin?

I mean, for us, I mean, of course, we always have M&A on our long-term agenda, but it's not something that we are looking at right now. I mean, we're focusing, as Samuel said, on turning around business that we have. We still have a long journey to go to be where we want to be. I would say that's the main focus for us as a company right now. In terms of dividend, that's not something that the management decides on. That's also ultimately an ADM decision, I would say. Hopefully that answers your question.

Yes.

Thank you very much.

Thank you.

The next question comes from Michael Lucene from DND Carnegie. Please go ahead.

Yes, good morning. A few follow-ups here. For me, it's first of all, yes, LCP area. And if you can comment on how much of the pre-buying that we saw was sort of concentrated to a few large public sector contracts or countries.

No, it was related to a few larger customers predominant in the public space.

For those water we have defined, I mean, like I said, it's hard to see exactly what is pre-buying and what is else, but the water we have defined is related to LCPS.

I saw that Sweden was clearly stronger in this quarter than five quarters, while the Netherlands was weaker. So is this sort of an effect on this pre-buying situation?

I think it's more variance between quarters. We had some really larger rollouts with some customers in Sweden and slightly lower seasonality in seasonality terms in the Netherlands. So I think nothing to read into that in terms of pre-buying. Okay.

And moving over to F&B, I was wondering if you can comment on what we're seeing in underlying SMD demand currently in the market?

As I said, I think in the Nordic hardware software business, we are starting to see slight improvement, but from very low levels. Still a lot of uncertainty, and I think cautious by customers continuing to... I mean, a lot of the SMB customers that I talk to and meet are still very cautious, and they're still postponing purchase decisions. So I would say still a cautious market with some slight improving trends, but still fragile, I would say.

Just a general question on the pricing situation here, when we see that hardware vendors are increasing prices by 20%, something like that. Depends, of course. But what do you expect in your business? How will this impact you? I mean, you have a demand side as well, and you have a pricing side as well. So I'm just curious about the net effect, how we should think about it.

But if we look at what the external analysis firms are saying, and I think we're seeing and saying the same, that we expect the volume, i.e. the number of units, to come down, especially in the low-end segment, and we're seeing that happen already now. But of course, with prices going up, the value still stays ADC is projecting like 2% growth or something like that. So all in all, it seems to be netting out quite much.

Okay, yeah, that makes sense. And we're going over to the non-standardized services, just after we understand this situation here going forward as well. Can you explain, first of all, what the services consist of? And again, I mean, maybe comment on how much revenue you have currently.

Yes, so if I start with the first part of it and then hand over to Julia, it's This is a legacy portfolio, a portfolio of older solutions and older customer contracts in the managed services space. So where we manage networks and services and workplaces. And it is, as I said, legacy versus our standard portfolio where we have, and it's very hard to scale. So a lot of them are customer unique, build on legacy platforms, etc. So they have they don't have a very long future and it's an area and a portfolio of customers and services where we see very limited possibilities to build scale and profitability over time and that's why we're taking the deliberate decision to instead exit this portfolio completely and instead focus on the standardized portfolio which is the majority of our managed services business where we see a demand and where we see effective margins going forward. And Julia, if you want to elaborate on the size?

Obviously, we don't share those specific sales numbers by department, but I can say it's a very small part of what is remaining of the legacy of the non-standard segment. Also, if you look at the total sales of managed services, for example, It's not a huge part of the sales, but from a profitability point of view, the managed services where we have standardized services is a big contributor to profitability. But again, on the non-standard, where we have been declining over time, and we are stuck with some fixed costs there, we have very, very poor profitability. Like you said before, not making money, basically.

So when this exit is completely done, to give you some view of it, of the size of the price, we do expect a run rate improvement of profitability in terms of millions on the yearly run rate.

Okay, that's helpful. In annual terms, right?

In annual terms, exactly. So it's not huge, but it is impacting and it's an important step for us to get more focused, more profitable and focus on the scalable parts of our business.

Okay, and with the 80 million cost adjustment that you announced last quarter, will you have managed the overall cost structure in that non-standardized part of your business, or will you have remaining cost effects? You mentioned two-year reductions.

I think those...

The 80 million is not linked to non-standardized sort of cost efficiency. It's the rest of the business. We have, of course, sized down a bit on personal, also on non-standard, but it's two separate projects, I would say, in that sense. Is that also the question?

Okay. Another thing here related to this. Well, as I said, I think the trigger for this was the decision that were now taken to clearly exit

This part of our business. Already before, we had the focus on the standardized services, and we had a plan of transforming with the majority of our business into the standardized portfolio. But during this quarter, we took the decision to drive complete exit of the non-standardized services, and then that led to the need of a write-down in goodwill primarily.

Sorry, go ahead.

So this is the Banelux part because the Nordic side seems to be developing well.

We have a bit of non-standard. If you know about our history of acquisitions, we have acquired service companies also in Finland and in Denmark. They are not performing according to plan. And if I add a little perspective on the accounting side, as written in the annual report where we did the impairment last year, It obviously means that we have a quite low headroom versus the impairment. So when then businesses like our non-standard underperforms, an impairment need can appear basically. And that is what we've seen happening here. So I would say it's quite linked to the accounting setup.

Okay. Can I just ask one final on the cost savings? How much did you have in the P&L this quarter? Obviously 80 million. How much did you see and how much do you expect in Q4?

We had a small part this year because we had the first part of it, but the full effect is going to come in Q4.

So the new organization including this was implemented on the 1st of May, I think. So basically one month out of three maximum for this quarter.

The next question comes from Daniel Thorsen from ABG Sindal Collier. Please go ahead.

Yes, thank you very much. First one on LCP. Do you expect to see a reverse of pre-buying activity in LCP to the extent that it could turn negative organic growth already in Q4, or is that more likely to happen in the next fiscal year?

I think with the uncertainty we're seeing in the market, it's impossible to project that in a perfect way. I think we just want to be transparent with what we're seeing in the quarter, and certainly to provide clarity and we are saying that of course pre-buying you know from some customers now can of course affect Q4 Q1 demand but it's very hard very hard to predict given the market circumstances right now okay fair enough on the gross margin that was particularly good here in the quarter it sounds like it was driven by higher prices and maybe a lag effect on delivering on your inventory

is there a risk that the gross margin contracts in the coming quarters due to high market prices?

I mean, as you said before, since we have this volatility in the market and also in the LCP segment, it can vary. Yes, as I said before, there are some possibilities this quarter from the pricing, which we are not seeing to the same, expecting to see to the same level in Q4. But overall, we don't guide on the margins.

Hmm. Okay, I see. You talked about inventory management a bit as well, but what's your strategy at the moment? Are you a bit cautious to see how the market develops, or are you building inventory faster than historically, for example?

I think that we took some decisions in this quarter to build a bit of inventory, but going forward, we're not planning to do any sort of further increases by being a bit more cautious. Obviously, we don't want to start building inventory to new heights.

I see, I see. Final one on SMBs then. Were there any regions standing out with positive organic growth in Q3, or did you see declining markets across all the segments?

I would say across all segments, but of course in a varying degree. And as I said, we are starting to see some underlying positive developments in the Nordic business and predominantly in Sweden. But as I said, The next question comes from Martin Wallstrom from SB1 Markets. Please go ahead.

Yes, good morning. I hope you can hear me. Yes, good morning. Great. Just one additional question, and that's related to what you've been speaking about, that units in the market can be down, but prices more than compensate. In terms of, do you see that customers get the sufficient volume here, or is there some form of pent-up demand building in terms of underlying units, or are you happy with what they're able to buy?

I think in the low and mid-range segments, we are seeing a limited supply. So, of course, there can be some pent-up demand. We know there is a pent-up demand in the SMB market, but the customers are still very cautious there. But besides that, As a reminder, if you wish to ask a question,

Please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Okay, thank you very much. That concludes our third quarter result presentation and Q&A. Thank you very much for listening in. Thank you for all the questions. As I said, it concludes this presentation. Thank you and have a great day.