Exsitec Holding AB (publ)

Hello everyone and welcome to the Q3 presentation for Excitec. Presenting today will be CEO Niklas Ek, CFO Carl Arneson and me Hampus Strangqvist. If you have any questions you can either use the raise hand function in Zoom or use the chat function. And with that I will leave the word to Niklas.

Thank you, Hampus. Hello, everyone. This is Niklas Jek speaking. I am the CEO and has been that since March this year. I will start off by making a short recap about our business as a reminder what we do. After that, we will cover Q3 financials and a short market update and also a recap of our priorities going forward. We are Excitec, making IT work together and we exist to deliver digital solutions that improve our customers' businesses and we aim to be a one-stop shop to the customer. We do this by selecting different softwares and develop in-house integrations that can be reused. By implementing different software and provide long-term support, we aim to be a single point of contact for our customers. The digital tools that we use can address areas like reducing financial administration through automation or use data for better decision making. Our customer base today is around 5,500 organizations and our target market is medium to large sites companies in the Nordics. No one customer typically is more than around 1% of our revenue, so very low risk in the individual accounts. We combine the software packages we work with to fit different industries and we have customers in many different industry sectors as you see in the slide. These are the primary software providers and partners that we work with at this time. We are resellers of softwares and the selection has grown to just over 20 software components. We combine these softwares with the integrations that we develop in-house. And we have revenue share partnerships with these software providers where we market and sell their softwares to new accounts and make customers successful in using the software over time. The business model is built on three revenue streams. The sales and marketing is focused on selling software together with integrations. This is sold on a subscription model where you pay as you use. This revenue stream has grown to 24% of our net revenue. Just under two thirds of our revenue is from professional services where we implement the software and make the customer successful in using the software over time. We also do custom development and custom integrations when needed. The third revenue stream in our business model is that we offer our customers a single point of contact support on a recurring fixed price model. In this engagement, we can also take care of infrastructure, internet access and IT security and such things. Excitec is a Nordic company that started out from Linköping, Sweden. Today we are around 630 employees with Sweden being the biggest SIG segment. We have been successful in the last 10 years with growth, both organic and from M&A. Our EBITDA has followed our growth nicely with an exception in 2024. Excitec runs one of the largest trainee programs in the Nordics and has been doing that with scale since 2015. We are very proud of this and almost 40% of the employees working at Excitec started as trainees. Our trainee program is the main source for recruiting new people and an important addition for future growth. And here they are, the class of 2025. So in the Nordics, we welcomed 60 new trainees in August. So let's dive into specifics for Q3. I will start off with the highlights and then leave the word to Carl Arneson, our CFO for the financial details. So Excitec in Q3, I am really pleased with the results which demonstrate the stability of our business model. We report an adjusted EBITDA of 25 million SEC with a margin of 14%. This is a real improvement compared to Q3 last year where we reported 6 million SEC in adjusted EBITDA and a 4% margin. The improvement comes from all segments and we will get back to those details shortly. I am also pleased that all segments report organic growth at the same time this quarter. And the main driver for our strong result is our recurring revenue from software. It continues to grow, reaching 217 million SEC on an LTM basis, which represents a 25% increase compared to the same period last year. Carl will get back to this shortly. The growth in recurring revenue comes from several areas. The acquisitions that we have completed are a strong new sales performance over the past years and are continued focused on retaining and developing existing customers. Q3 2025 performed better than the same quarter last year with a 10% increase in order intake. The third quarter is typically the weakest period for new sales due to the summer holiday season. And that was also the case this year. But nevertheless, the improvement compared to last year shows that our efforts to focus on sales execution are paying off. I leave the word to you, Carl.

Thank you, Niklas. Hi, everyone. Starting then with our net sales, we reported, as Niklas mentioned, 16% growth in Q3 versus Q3 2024, where the organic growth summarized to 6%. Following a stronger Swedish Krona, we actually delivered slightly stronger locally in both Norway and Denmark. During the quarter, we saw stronger net sales performances in all our segments, both organically and through our acquired businesses. This quarter involved our businesses in Sweden and Denmark. And I will come back to the development per segment shortly. Our growth comes from all our revenue streams, where the professional services and software were the main ones. And the growth in recurring revenues from software stands out also in this quarter. But still, the overall feeling is that our customers tend to push decisions for minor system updates and standard adjustments into the future, while new projects driven from our sales department are developing more positively. Also, looking at the trend the last nine months, we see a 12% growth year-on-year where the majority comes from acquisitions. Moving over to our adjusted EBITDA we report a 25 million SEK profit which is a certain uplift versus the third quarter last year. As we mentioned earlier Q3 2024 was a slightly weaker quarter for us but the uplifting is just not because of softer comps. Main drivers behind the uplift in This quarter was the continuous growth in recurring revenues, relatively stronger professional services as well, but also by solid cost control. However, and as mentioned, we still feel that we can deliver even stronger performances almost across all our segments going forward. The efficiency in especially Sweden and Norway can be improved and this is something that we continuously are working on. Year to date we report an adjusted EBITDA that is 27% up versus last year. Let's continue with the net recurring revenues from software that for the whole year and for a few years back has been a highlight for us. For the last 12 months we see a growth of 25% year-on-year in this revenue stream that made up 24% of our total revenues last year. The growth is driven both through M&A, new sales and to a certain degree also from price increases. Overall the organic growth in net recurring revenues from software is summarized to approximately one third of the growth for the LTM development, so two third from acquisitions. This development is, of course, a very important contributor to our earnings, but it's also a good indicator for us that we have a strong offering and customers are continuing to use and deploy the software that we deliver. Regarding our different segments then. Starting with Sweden. Sweden delivers a 15% growth year-on-year in Q3 where of the organic growth was 3% up. The adjusted EBITDA margin also developed positively and ended up at 12% versus 5% last year. Certainly a strong margin also looking at if we compare to Q3 2023. The higher margin year-on-year can mainly be explained by stronger recurring revenues, a higher efficiency, but also a lower cost base in general, I would say. And we also have the trainee program that was slightly less extensive this year that contributed to the cost base as well. And Sweden bared the majority of the cost for the trainee program. Norway reported a 4% growth in total net sales year-on-year, however, slightly affected by a weaker Norwegian krona. So in local currency, the growth actually was 7%. It's also satisfying that we continue to increase our adjusted EBITDA and the margin in Q3 from 6% to 15% year-on-year, where an improvement in efficiency was the main driver behind the uplift. The margin of 15% is in fact all-time high in Norway for a single quarter since we made the acquisition of Vitari back in 2021. Even though we are happy with the improvement year-to-year in Q3 and year-to-date as well, we still feel that we have more opportunities going forward in Norway. Finally, our third segment, Other Nordics, that covers our offerings in Denmark and Finland, reported a very strong growth of 58% in the quarter, where approximately two-thirds of the growth was acquired compared to Q3 last year, and that was related to Denmark. Especially the professional services in Denmark continued to develop strong also during this quarter in Denmark, and also Finland contributed to the improved margin for the total segment. We have been able to serve the customers that we acquired from ECIT in Denmark last year well also during Q3, and we see further potential also in the coming quarters for this. Regarding the margin for other Nordics, we still believe that it certainly should be higher than last year, but it also can vary a bit from quarter to quarter. So please bear in mind there. And by that, I hand over to you again, Niklas.

Thank you, Carl. I will continue with a short update on the market conditions and our priorities for 2025. Our existing customers remain somewhat cautious about investing further in their current solutions. We have seen this pattern over the past 18 to 24 months and the trend has not yet shifted. On the other hand, we do not see any signs of increased churn, which clearly indicates that our customers continue to rely on and value our solutions. M&A is an important part of Excitec but so far in 2025 the timing has not been right for us. If we compare to a year ago we do see more activity when it comes to M&A and as always it needs to be a good match for both Excitec and the selling part. Leads are up by 10% in the quarter compared to last year which is a positive sign for our sales pipeline. and one KPI I closely follow is the time it takes to close a deal from a qualified lead. In recent years, that cycle has been relatively long compared to historical levels. However, during 2025, we have seen a gradual improvement with deals closing faster. This is also a good sign for us and we will continue to monitor if the trend continues. So our business priorities in 2025. Strong sales execution is important for our continued growth. We have great confidence in our sales force, which continues to deliver solid results in Q3, where the order intake was up 10% compared to Q3 last year. When it comes to our second priority, operational excellence, we still see room for improvement. We are continuously working to balance our workforce in line with the demand for our different offerings, which, for example, means that some consultants change areas to work with other offerings where we see a bigger demand. The beginning of the third quarter traditionally represents the most challenging period of the year for our professional services, but the trend has improved week by week towards the end of the quarter. The last priority for 2025 is focused on M&A and the integration of acquired companies. About M&A, as mentioned, we see more activity than a year ago and as always we are in dialogue with companies to be able to make selective acquisitions when the timing is right. Brightcom, our largest acquisition in 2024, added Microsoft ERP to our offering and we believe there is potential to scale the business further around Microsoft since we see strong and growing demand for our solutions and services. This is a reminder about our financial goals. We have a goal to increase our net sales by at least 15% per year over time and our performance target is to increase our EBITDA per share by at least 15% per year over time as well. Our stability measures is that our net debt must not exceed two times our EBITDA. And the last one is that our policy is to distribute 20 to 40% of the profit after tax. So this concludes the presentation. Are there any questions for us, Hampus?

Yes, we have received a question. How much is the effect on EBITDA from a more downsized training program compared to last year?

I can take that. I would say it's definitely a material amount in a number of million sec, but it's definitely not the majority of our improvement when it comes to EBITDA improvement.

We have another question. Could you elaborate a bit on Norway's margin? Is that sustainable or driven by some special effects? And if it's sustainable, what's the major drivers for this structural change?

uh yeah it's not special uh effects so so i think it's sustainable and i'm pleased with the improvements in in margin for for norway and i think that we can continue on that path going forward and there's just a couple of things that we have done with norway over the past years but the efficiency in our professional service is of course one of them and um And we do see still more room for improvement. So I think Norway can perform even better in the future. So it's not a one of this quarter, I think.

Good. We have another question, which is we return to organic growth in Q3. Is this something that is something going forward as well or where we're at with the organic growth?

Yeah, I would very much like to have organic growth in the future as well. And I'm really pleased that we have organic growth from all the segments at the same time. We have not been spoiled with that for a while. And I think that we can continue with organic growth. If we can continue with strong order intake and we can continue to... to do everything that we can to be really close to our customers and helping them with the everyday issues that they have with their IT solutions. So then I think we can continue with organic growth for sure.

It seems that we don't have any more questions. If there's any questions. Yeah. Okay. We got another one here. And we had a question from Rasmus who says, are personal retention still on very high levels? As you saw in the, is the question about the personal churn rate? I think that's, is the personal churn rate on high levels as in the end of 2024? Yeah. So how is the personal churn rate?

The turnover?

Yeah, the turnover.

Okay, yeah, yeah. It's pretty much been stable for around nine months now. So it's not higher, it's not lower. So it's pretty stable levels. We did see in the end of Q2 in 2024, it dropped. And then it was on lower levels. But then since the start of 2025, it's been pretty much on the same levels.

So more back to normal, is that what you're saying?

Yeah, more back to normal, you can say.

Yeah. Great. Now it seems that we have exhausted all the questions. We thank you very much for listening on Excitec and wish you a good day. Thank you. Thank you.