Karnov Group AB (publ)

Welcome everyone to Carnum Group's earnings conference where we will present the outcome of the fourth quarter of 2024. Please go to slide 2. I am Pontus Buhlson, president and CEO of the company. With me I have our CFO Magnus Hansson and our head of investor relations Eik Bergheim. Magnus and I will present the outcome of the quarter using a few slides and then we'll open up for questions. With that said, let's get started with the presentation of the fourth quarter. Please go to slide 3. We achieved strong results in the fourth quarter. Margins improved significantly as synergies are coming through according to plan. Moreover, we advanced our AI sales providing added value to our customers. Net sales grew to 691 million sec in the quarter. The organic growth was 4% driven by strong online sales including new AI solutions. The adjusted EBITDA margin improved to 24%, which is an improvement of almost 5 percentage points compared to previous year. Thanks to a strong operating cash flow, leverage is now 3.0 times which is in line with our financial targets. Let's move over to slide 4. In 2024 we advanced Carnum Group's position. The market demand for legal information solutions is strong and increases due to more regulations and increased complexity in legislation. We have generated value for the stakeholders during the year. We launched AI solutions generating value to our customers while in parallel achieved cost synergies to improve margins. In Region North our AI assistant has been adopted by some of the largest law firms in Denmark and Sweden including Paul Smith, Formula NOSS, Kamrad Keden, which is the largest law firm in Denmark. All legal professionals at this firm are now using our AI assistant. In Sweden we see strong interest from the public sector. Many of the courts have bought our AI solution. In Region South we have launched new versions of our three flagship products in France, all with AI and launched enhanced AI add-ons in Spain. The AI solutions have been sold to all customer segments in both countries. We will continue to launch additional AI features during 2025. While being deeply focused on customer value and innovation, we are equally focused on costs and achieving our synergy target. We reached the annual run rate synergy target of at least 7.5 million euro by the end of 2024. The combination of our locally authored content and AI technology brings significant proven value to all legal professionals. Development is progressing rapidly and we need to be both decisive and agile to meet our customers needs. We have taken the next steps in fulfilling our AI ambition by combining our European innovation capabilities and local market expertise into a group AI product organization. Adopting best practices from across the group will benefit all our customers, as we will leverage the strength of being a European player to create scalable AI products with local customer value. We are pleased to have achieved the annual run rate synergy target of 7.5 million euro for 2024. The annual run rate synergy is amounted to 8 million euro at the end of the year as we have continued to deliver on all work streams. We reiterate our ambition to achieve annual run rate synergies of 10 million euro by the end of 2026. This will be achieved through operational excellence, meaning we expect the cost to achieve for the region's south integration to decrease from 2025. In February 2024, we launched our group wide acceleration initiative. The synergies have been harvested in region north and group in the first phase, while synergies in region south are part of the second phase coming from 2025. Our ambition is to generate cost efficiencies of 10 million euro with full effect on run rate basis at the end of 2026. At the end of the year, the annual run rate synergies amounted to 6 million euro. Next slide, please. In this slide, you can see our two cost efficiency initiatives running until the end of 2026 with the ambition of harvesting efficiencies of 20 million euro in total. And that we now at the end of 2024 have harvested annual run rate synergies of 14 million euro. Next slide, please. I will now comment a little on our segment performance, starting with region south. We are pleased to see stable sales in both Spain and France in the quarter. Through our integration programs in Spain and France, we have laid the foundation for profitable growth going forward. In Spain, we have initiated the next phase with greater external focus, highlighted with the launch of our first external marketing campaign as Aranzar de la Ley o la futuro. Hello, future. It is a campaign focused on the significant customer value from transitioning to our AI solutions. During the spring, we will add more features to the AI solutions, reaping the full benefits of our strong local proprietary content. In France, we launched our new product suite in the quarter. Three flagship products, all with AI, to the benefit of our customers. Next, we have been active in the market, promoting the new products at conferences and held own events with strong attendance from the legal industry. The sales team, which has been strengthened during 2024, is working dedicated promoting the new solutions. Next slide, please. Region north continues to perform well, both in terms of growth and profitability. The growth is driven by increased subscription based online sales, including AI. As mentioned earlier, some of Denmark's and Sweden's largest law firms have adopted our AI assistant in the quarter. The acquired carved out Schultz Legal Information business has contributed with 26 million SEC in net sales in the quarter. The margin improvement is a result of synergies coming through from our acceleration initiative and operational leverage from the increased net sales. Next slide, please. With that said, I will now hand over the floor to our CFO, Magnus Hansson. He will tell us more about the financial results. Magnus, the floor is yours.

Thank you Pontus. So let's start with an overview, switching to slide 12. In 2024, we achieved net sales of 2.6 billion SEC, a solid net sales growth of 5%. The growth is driven by increased online sales, including selling more licenses to existing customers and attracting new customers. Currency effects had a negative impact on net sales of 0.3%. The acquired carved out Schultz Legal Information business has contributed with 50 million SEC in net sales in 2024, mainly relating to our acquired customers on the Danish municipality market. Please go to slide 13. Breaking down net sales on segment level, we see continued strong organic growth in Region North and modest growth in Region South in the quarter. Organic growth is driven by online sales within the public sector, supported by our EHS businesses and tax and accounting business. We are pleased to see Spain and France both growing and we are entering the next phase of the integration to achieve profitable growth going forward. Revenues from AI sales is limited in the fourth quarter as the subscription revenues are recognized over the contract period. Next slide, please. On slide 14, you see the net sales development within online and offline, split into segments. In Region North, the online sales increased by 20% compared to Q4 last year and accounted for 92% of net sales in the quarter. In Region South, the online sales increased by 5% compared to Q4 last year and accounted for approximately 76% of net sales in the quarter. Please change to slide 15. Subscription based sales increased during Q4 and represent 86% of sales in the quarter. In Region South, subscription sales decreased by 2%, however online subscription sales grew by 7%. Please change to slide 16. The adjusted EBITDA amounted to 162 million SEC in the fourth quarter. This corresponds to an adjusted EBITDA margin of 24%, which is an improvement of close to 5 percentage points. Synergies are coming through as expected, meaning cogs and personal expenses are decreasing. Items affecting comparability amounted to 63 million SEC during Q4 and are related to the integration of Region South as well as the groupwide acceleration initiative. At the end of Q4, we have achieved synergies within the group of 14 million euros on an annual run rate basis. The effect in the quarter amounted to 2.8 million euros. As earlier announced, we are delivering on our plan to achieve synergies of 20 million euros with full effect on an annual run rate basis by the end of 2026. Let's move on to slide 17, please. In Q4, net sales amounted to 322 million SEC. Organic growth was 8%. The growth is driven by online sales. We continue to strengthen our market position and attract new customers, as demand for legal tools are increasing. Adjusted EBITDA reached 133 million SEC in Q4. This is an increase of 18 million SEC compared to last year. The adjusted EBITDA margin amounted to 41%. The improvement is due to two main components, efficiencies from the acceleration initiative as well as operational leverage from increased net sales. The effect on EBITDA level from the acceleration initiative amounted to 1 million euros in the quarter. Please move on to slide 18, which is the region south segment. Net sales in region south increased by 5 million SEC compared to Q4 of last year. Although growth is modest in the quarter, we have launched the next phase of the integration and are confident in our ability to deliver profitable growth going forward. The adjusted EBITDA margin was 16% in the fourth quarter. The effect on EBITDA level from the region south integration amounted to 2.8 million euros in the quarter. On an annual run rate basis, the harvested synergies amounted to 8 million euros by the end of the quarter. Moving to slide 19, which presents the segment group functions. Group functions consist of functions taking responsibility for group-wide tasks. Expenses in Q4 was 30 million SEC compared to 23 million SEC in the third quarter. Exploratory AI projects for future customer value are included in the operating expenses. Please go to slide 20. The adjusted free cash flow was 210 million SEC in the fourth quarter, which is an improvement of 61 million SEC compared to Q4 of last year. Adjusted free cash flow during 2024 was 77 million SEC stronger than last year. Our colleagues have made a strong effort renewing customer contracts during Q4 and we are pleased with the improvement. The leverage was three times EBITDA last 12 months by the end of December. I'm now handing over to Pontus again, who will present our last slides.

Thank you Magnus. Please switch to slide 21. Thank you, Paul. It's been a successful year for Kano Group and I'm very pleased with our achievements. The demand for our legal information services and software is strong and growing. We are both advancing sales of our AI solutions benefiting our customers while achieving synergies across the group, improving margins and generating value for the stakeholders. AI is transforming our industry. We have taken new steps in our AI ambition, combining our European innovation capabilities and local market expertise into a group AI organization. Adopting best practices from across the group will benefit all our customers as we will leverage the strength of being a European player to create scalable AI products with local customer value. Despite globally turbulent times, Kano Group stands strong and has exciting opportunities ahead. Please go to slide 22. And by this, I'll end our presentation and we are now ready to take questions. So I'll hand over the conference again to our host.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Thomas Nilsson from Nordia. Please go ahead.

Thank you for taking my questions and congratulations on a strong quarter. When it comes to the AI subscriptions, I'm curious as to what percent of the annual contract value is now on the AI version of your products and what are your expectations for uptake for AI products for 2025 and 2026? Thank you.

It's of course an interesting and very relevant question, although we do not usually comment on specific products. And of course that's for competition reasons. However, I would like to underline the fact that you could say that or might think that the legal industry is conservative and therefore are hesitant in taking on these opportunities. But we see on the contrary that they are very enthusiastic. We have tried to develop these services, so it taps into the way a lawyer, for example, works. So, so far we've seen great development also in terms of market development. And of course we see that some of the biggest law firms in Sweden and the biggest law firm in Denmark, as I mentioned, is now among the customers on our AI solutions. And also, which is, we are really proud of the fact that many of the courts in Sweden already have adopted it. However, we don't comment on specific numbers. I'm happy to say that, as we mentioned last quarterly report, that we see an uplift, the price uplift of at least 30 percent, while it holds true. So that's at least one number I can give you.

Okay, thank you. And my second question is, what's the outlook for regions south return to growth in 2025 and 2026? And are the French operations closer to showing growth in 2025?

Well, that would be a forward looking question. As we've said before, we have invested quite a lot in the French business. We talk about the French acquisition as being a top line case. And we have now invested in a much stronger commercial team in the French business with a strong commercial focus throughout the business. We have launched the three new versions of the three flagship products in France. So we are quite optimistic of the future in France. In Spain, we have focused on the integration. We have, as we said in Q3, sort of done the technical part and have removed the technical risk in that integration. And we're now then turning the focus on growth. So we're investing, for example, as Pontus mentioned, in a marketing campaign now, starting just about now, launching the first versions of our common company in Spain, Avanza de la Ley.

Okay, thank you. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Okay, thank you everyone for listening and for the questions. We will disclose our Q1 report on the 14th of May, and we of course hope to hear from you then, if not earlier. Thank you and have a nice day.