Exsitec Holding AB (publ)

Hi everyone and welcome to this web presentation of the Excitec Q1 report. My name is Carl Öberg and I will be moderating this presentation. Presenting today will be Group CEO Niklas Ek and Group CFO Carl Arneson. If you have any questions during the presentation, either use the raise your hand function or write directly through the chat here in Zoom. With that, I hand it over to you, Niklas and Carl.

Thank you, Carl.

Hello, everyone. This is Niklas Jek speaking. I am the CEO at Excitec and we'll start off by making a short recap about our business as a reminder what we do. After that, we will cover Q1 financials and a short market update and also 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. Excitec is a Nordic company started out from Linköping, Sweden. Today we are around 600 employees with Sweden being the biggest 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. Best of breed is how we approach our customer solutions. Many of our delivers are centered around the ERP and the finance system, which act as the core. By selecting the right components and ensuring they work seamlessly together through our in-house integration, we can take full responsibility for the entire solution. Our customer base today is around 5,500 organizations and our target market is medium to large size 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 software and the selection has grown to over 20 software components. We combine these softwares with integrations that we develop in-house. We have a revenue share partnership with these software providers where we market and sell their software 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 25% of our net revenue. And 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. And the third revenue stream in our business model is that we offer our customers a single point of contact support on a recurring fixed priced model. Excitec runs one of the largest training programs in the Nordics and has done so at scale since 2015. We are very proud of this and today almost 40% of our employees started their careers with us as trainees. The trainee program is our primary source for recruiting new talent and an important driver for our long-term growth. Looking ahead, we plan to welcome a new group of trainees this fall as usual and the size of the 2026 program will be in line with 2025. So let's dive into specifics for Q1. I will start off with the highlights and then leave the word to Carl Arneson, our CFO, for the financial details. Overall, I'm satisfied with the development in the quarter, especially the strong profitability. We deliver strong earnings with an adjusted EBITDA of 49 million SEC and a margin of 21%. Organic growth was 1% in the quarter. And while this is moving in the right direction, we clearly see potential to increase the pace going forward. Recurring revenue from software continues to grow strongly, reaching 232 million SEC on an LTM basis, up 17% year on year. And finally, order intake from new customers was strong, up 38% in the quarter, reflecting solid demand and good sales momentum. With that, I will hand over to you, Carl.

Thank you, Niklas, and hi, everyone. Starting then with our net sales, we report a plus 1% organic growth in Q1 versus last year. But if we include the divested operations for ZECOM, the total growth for the group was instead minus 1%. Please then also note that the net sales excludes the capital gain from the divestment of the ZECOM business that we also finalized during Q1. During the quarter, we saw growth in net sales in our Swedish and Norwegian segments, while other Nordics declined. And I will come back to the development per segment shortly. Our growth comes mainly from recurring revenues in this quarter. And furthermore, Sweden was the only segment with growth in professional services. The overall market sentiment is still that customers tend to be a bit cautious. and push decisions for four minor system updates and standard adjustments into the future, while new projects proven from our sales department are developing more positively, also described by Niklas here in the previous slide. Moving over to our adjusted EBITDA, we report a 49 million SEK profit, which is a 7% uplift versus the first quarter last year. Main drivers behind the uplift is continuous growth in recovering revenues, but also by a solid cost control. Also worth mentioning here is that the capital gain from the divestment of the SEDCOM business is not included in the adjusted EBITDA. Also mentioned in recent quarters, we still feel that we can deliver even stronger performances and profitability almost across all our segments. Even though we've seen an uplift in Sweden here in Q1, the efficiency in especially Sweden and Norway can be improved. And this is something that we also prioritize in our daily operations. LTM, the adjusted EBITDA of 161 million SEK equals a 2% growth versus the full year last year. Here we see a consolidated view over the net sales and adjusted EBITDA margin for the total group. The adjusted EBITDA margin of 21% is a certain uplift versus Q1 last year. And it's also our best reported quarterly margin since Q2 24. As I mentioned here in the previous slide, main reasons behind this improvement are stronger recurring revenues and the solid cost control across the line. And it's also satisfying that we see an increase in the net sales per employee in general. So let's continue with the net recurring revenues from software. This has been a highlight for us for a number of years. And for the last 12 months, we see a growth of 17% compared to last year in this revenue stream that made up approximately 25% of our total revenue last year. This growth is driven both through new sales, price increases, but also to a certain degree from M&As. Overall, the organic growth in recurring revenues as per Q1 summarized to approximately 2% of the total growth. This development is, of course, a very important contributor to our earnings and also strength with our business model. But it's also a good indicator for us that we see a strong offering and that our customers continue to use and deploy the software that we deliver. And also, finally, please also note that these revenues are net revenues. Regarding our different segments then, starting with Sweden, Sweden delivers a minus 1% growth in Q1 year-on-year, although the organic growth was plus 3% if we excluded divestment of the CEDCOM business. The adjusted EBITDA margin also developed positively and ended up at 23% versus 18% last year. So we continued the margin uplift trend from last year, also in Q1. The higher margin here year on year can, of course, be explained also here by stronger recurring revenues and a slight uplift in consulting services, but also to a disciplined cost control. Norway reported a plus 2% growth in net sales year on year. And here we also find it satisfying that we continue to increase our adjusted EBITDA and margin in Q1 from 14% last year to 15% this year. The main reasons behind the uplift is higher efficiency, but also cost control. We maintain the margin of 15% also in this quarter. It's the same as we had in Q3 and Q4 last year. And 15% is also the highest level we've had for Norway since we entered the Norwegian market back in 2021. But even though we're happy with the improvement, we still feel that we have even more opportunities in Norway going forward. Stronger growth and an improved margin here in Norway are key focuses for us going forward. Finally, our third segment of the Nordics that covers our offerings in Denmark and Finland reported a growth of minus 7% and the organic growth was minus 4%. The decline year-on-year can fully be explained by the development in our Danish operation that had an exceptionally strong Q1 in 2025. Our ambition here is, of course, to as soon as possible to come back to positive growth. Meanwhile, Finland delivered both strong sales numbers as well as a margin contribution to the group. 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 2026. The market situation is essentially unchanged, although we saw some improvements towards the end of the quarter. Sweden stands out with stronger development than our other markets. As mentioned earlier, order intake in new sales was strong in the quarter, reaching the highest level we have seen in the first quarter to date. At the same time, we see shorter sales cycles from lead to signed deals, as well as improving lead quality. Over the past few years, we have seen more cautious approach to IT investments leading to pent-up demand. As market conditions improve, we expect this to gradually translate into increased investment activity. M&A remains an important part of our strategy. We see increased market activity and are evaluating selective opportunities to strengthen our offering and support long-term growth. So let me briefly touch on our three key business priorities for 2026, starting with Business Next, the cloud version of Abisma Business. This is about accelerating the migration to cloud ERP. We have had a strong start in Q1 with high activity among existing customers, increasing interest in migration and solid new sales across all segments. For Microsoft, the focus is on scaling our platform offering. Here as well, we see a strong start to the year with high market interest and several new customers added during the quarter. And finally, organic growth, where the focus is on increasing the overall growth pace. We see clear potential to improve, and while development is moving in the right direction, we remain focused on accelerating growth going forward. 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 presentations. Do we have any questions, Carl?

Yes. Let's move on to the questions. First up, we have Thomas Nilsson from Novia. And the first question is organic growth remained modest at plus 1%. What are the main bottlenecks reaching a higher organic growth rate? Is it customer demand, sales capacity, implementation capacity or market conditions?

Yeah. So the organic growth is the one that we're not pleased with in the first quarter. It's 1%, but we are always aiming higher. But it's not our capacity. It's not the sales capacity or implementation capacity. I guess it's a combination of customer demand and market conditions. So when we look at our different revenue streams, we see growth in the recurring revenue from software. So we're pleased with that one. So it's down to the professional services. And a reminder to all is that even though we see strong new order intake from new customers coming into us, still 80% of the revenue in professional services comes from existing customers. So it's an important part to see how our existing customers are acting. And it has been a bit passive over the last two years, and it's not really much of change in that market conditions. So it's a combination of the market and the customer demand. But we still think that we can do more and we are not happy with just one percent. We were aiming higher than that. So that was the one about organic growth.

Yes.

And the second question is, given the current developments in AI, do you see any signs in your customer base when it comes to renewing contracts and signing up for long-term support agreements?

No, is the short answer. We can't see anything about that. Customers churning our support agreements due to AI, no.

And the third question is, how do you intend to address the often discussed seat compression risk? How much of your revenue is seat-based versus non-seat-based? And are you considering changing your invoicing to be indexed to other metrics than the numbers of physical users?

Yeah, I think overall it's a change in the market and it's mainly driven by the software providers, how they are invoicing the customers. And they have been in transit in the last couple of years. So they are looking more and more into transaction based invoicing rather than seat based. And I think that will accelerate in the coming years with AI and cloud consumption and so on. And it was a question about how much of it is seed-based. I don't have that in my head, really. We can look into that if it's interesting. But we see a change in the market and from the software providers that they are not looking at seed-based anymore as they used to. So we're seeing a change in there. So it's more of a transaction-based invoicing.

Okay. Before we move on to the rest of the Q&As, we have Jacob Benon who has raised his hand. So please go ahead and unmute yourself. Let's see if we can hear you.

I can't hear you, Jacob. Are you trying to say something?

Then we move on to the Q&A. We have a question from Philip. You don't mention M&A in the report. What's your view on this going into 2026?

I just mentioned it in the presentation here, but we still see M&A as an important part of our strategy. And if we compare it to the M&A activity, if we compare it to one year ago, we do see more activity now. I think that the first half of 2025 was a bit passive and it was a bit cautious market overall when it comes to M&A. But after the summer holidays in 2025, so the whole fall in the first quarter of 2026, we do see more activity. Both when it comes to interesting companies out there that we would like to talk to and also we're getting more questions from external parts about companies looking for acquisitions. So I think it's more activity now and we are still searching for the right acquisitions for us. So still an important part of the strategy for sure.

Let's try again with Jacob. I think we need to unmute him.

Okay. Let me see if I can do that.

Now I think we can hear you. Please try, Jacob. Yes, hello.

Yes, hello.

Yes, now we can hear you.

Good. Perfect. Hi, Niklas, Carl, and Carl number two as well. Just a couple of questions from me. Wanted to start with recurring revenue from recurring software subscriptions. Maybe this is a question directed to Carl. I didn't really understand the organic growth here in Q1. It grew by 14%, if I'm not mistaken. And Brightcom was fully included in the numbers in the comparable period. So if I'm not mistaken, the growth of 14% should be completely organic or am I missing anything here? Thank you.

Yeah, we're comparing the LTM numbers year on year. So we had a 17% growth in LTM as per Q1 this quarter versus Q1 last year, where two-thirds of this was organic. So if we look back at the... At the LTM number in Q1 2025, there are some differences there where Brightcom is also included. So the Brightcom acquisition may have an impact on the comparable number from Q1 last year.

Okay, great. But is there any reason we cannot compare Q1 2026, the revenue there of, I believe it was 61, 62 million compared to the 54 in Q1 2025? I mean, that growth should be organic or is there anything that...

yeah yeah the the the the quarterly uh the quarterly the quarterly revenues from from uh recurring revenues uh are totally correct and 100 organic as you mentioned we often uh but since since the uh these recurring revenues sometimes change a bit when it comes to invoicing periods. We measure the recurring revenues on an LTM basis. So that's why we use different metrics there. You can look at, of course, both the Q1 numbers compared to each other, but a better metric is the LTM number.

Okay, perfect. And just to be clear, did you say that there were two-thirds organic growth or one-third organic growth in that? Two-thirds. Two-thirds.

Okay. Of these 17%, yeah.

Perfect. Thank you. And a follow up then, would you say that the demand when it comes to growth in software subscriptions is more tilted from new customers buying their first software from Excitec? Or is it existing customers buying additional softwares?

It's a combination, really. So we are always looking to do the cross-sale of existing customers. Unfortunately, not all of our customers are using all of the solutions. So we are actively working with the cross-sale. But it's a combination. But when it comes to an ERP system or finance systems, it's usually new customers coming in. And then We can work with the customer and develop them over time and then we can add more solutions like a BI system or a CRM system and integrations and so on. But it's a combination. I don't have the actual number in my head. What's the...

the share of it yep okay thank you for that and um uh i believe uh i had some technical difficulties here but you talked a bit about mna so maybe just repeating because there was no mentioning around mna activity in the ceo letter which is a contrast to q4 um how is activity in the mna market now in have how it has been now in q1 compared to last quarter

Yeah, if you compare it to the last quarter, I think it's mainly the same. I said previously here that if you compare it to one year ago, we do see more activity now. So the first half of 2025 was a bit passive and the whole market was a bit cautious. But after the summer holidays and in the fall of 2025, we did start to see more activity there. So that both from when we approaching companies wanting to talk about them, about acquisitions, and also external parts bringing in potential acquisitions to us, that activity is up as well. So more activity and it's still an important part of our strategy. So we're working actively with it.

Okay, thank you. Appreciate the color there. And if we continue to talk a bit about capital allocation, I mean, you have a history of acquiring companies at around somewhere around seven times EBITDA, sometimes higher, sometimes lower than before realization of synergies. And just looking at like my forecasts now, I think that Excitec is trades at slightly above nine times EBITDA. And this gap between your own valuation and the valuation multiples of potential M&A targets that has closed somewhat compared to the history. So my question is, have you discussed anything internally about making share buybacks or synthetic share buybacks of your own shares? And if so, what is your conclusion?

Hi, Jacob. Karl, I can answer on that one. Of course, when it comes to share buyback, that is something that is pretty new for the First North listed companies. Nothing that we can comment on here in the quarterly call. But of course, we've seen and we are aware of the possibility to do that, of course. But as you mentioned also, it's correct that our valuation, of course, has declined to a certain degree after the year-end. It's true.

Yeah, okay. I see fully understand that you can't comment on it in super much detail, but thank you anyways. And the final question for me is also regarding AI. And you answered the question here before about AI in, how do you say this, the support revenue. And I'm a bit curious about, because it seems like Software revenue is still growing very nicely. So far, your customers aren't starting to vibe code their own ERP systems, at least. But what about consulting? Are you seeing any change in behavior from your customers compared to Q4 regarding AI that may or may not affect your consulting business? Thank you.

The short answer is no. We do not see any major changes in the consultancy business. And overall, when it comes to AI, we see AI as something that strength and both are offering and our long term position. So I think that our position at Excitec is really good when it comes to AI, since we are the ones on top of the software providers. So bringing value to the customers, implementing the systems and solving the customer issues with the different tools and And sometimes it will be the standard software from the software providers, and sometimes it will be integration. Sometimes it will be something with AI. So we are working very much with that part to see what we can bring to the customers. But so far, it's not from the customer side that they are asking us questions every day to implement AI in their everyday business. But at the same time, we see the embedded solutions from the software providers. They are working actively with AI. So it's already implemented in some of the places. So it's a lot of questions out there, of course, and the customers but they are not replacing us with their own solutions or their own AI experts in any way so far.

Okay, thank you. That's very valuable. That's all for me. Thank you very much.

Thank you, Jakob. Let's move on with the Q&As. So now we have a question regarding that around AI. How many inbounds do you get from customers wanting to implement AI in their software stack? Do you see any trends there?

How many inbounds? Well, to be frank, not that many really. So it's more us going out to the customers, informing about what's new in the actual softwares and what we can help them with. So by now, after the first quarter, we do not see that high activity when it comes to AI from our existing customers. And that's the most important part to be close to our existing customers to see what the actual needs are out there. But so far, not that much. Nope. Thank you.

And another question on AI. Given that integrations now can be significantly faster than done with AI, how does this affect your integration platform going forward? Can you still charge the same amount for your work?

We think that we can do more for more customers with the same effort. And I think that will over time increase the demand out there. So if we look at an integration from a couple of years ago that was a bit too expensive for customers to invest in, I think that if we can lower the bar here and we can do more for the customers with existing force, I think that's something really good for us. And I think over time that can improve our margins as well. But we are of course also looking at the different models, how we will charge customers for different solutions. And maybe when it comes to just integrations, that will be the first part that's not really based on ours as before. Still, it's a lot of ours out there, but we are working with other models as well. And I think that we can do more with the same effort. And that overall is something good for us.

yes and a related question to to the integrations do you see any trends in that software companies do their own integrations with other software logically this would make sense for the companies to easier onboard new customers

no not really no no i think we still have an important part to to play here and i think that would be even more important when it comes new softwares out there with ai we we are the ones with the customer relations and we are the ones implementing and taking care of the customer over time And as I showed in the picture, best of breed, the in-house integrations that we build and that can be reused, that's really important. And we are always looking to find new ways to integrate new systems. So I think we're in a good position there.

Perfect. Then we have a question from Oskar Höven Matteson, and he is asking, how is Brightcom developing?

Yeah, good. As I mentioned in our focus area, the Microsoft scaling, that's an important part for us. And we see that the offering is strong when it comes to Microsoft Business Central, and we are bringing in customers every quarter.

so we are happy with that i think we're in a good position to to continue have growth with the microsoft business central then another question from oscar how is the utilization in the consulting business is the cost base and capacity balanced against current demand or do you see a need for adjustments

We have seen better utilization, especially in Sweden. That's what I mentioned here before. So we have seen better in Sweden in Q1. But this is something that we work with every day to be balanced against the demand. And it's a bit different between our different segments. It's different between our different offerings. So we are always looking to see if it's a higher demand with some offerings. We are moving people over there. And so that's kind of an adjustment that we are working with every day. So it's a bit different when it comes to the different offerings for sure.

And the third question from Oscar is, are there structural reasons for the lower profitability in Norway or can it reach levels comparable to the Swedish market in the long term?

Yeah, in the long term, we are aiming to reach the same levels as in Sweden. And at the same time, we are reaching to have higher levels in Sweden. So we would like to improve all of our segments, really. But there's nothing really structural or anything like that. So we are working with that. And if we look at the last five quarters now, we reached a level of stability in Norway that we are really pleased with. So I think we can both grow from there when it comes to organic growth and also to keep improving the margins to reach Sweden's levels.

That's all questions that we have from now. If no one else had any questions. I don't think so. So then that concludes this presentation. Thank you very much for listening in and we would like to wish you a continued good day. Thank you very much.

Thank you, everyone.

Thank you.