Karnov Group AB

Welcome everyone to Carniv Group's earnings conference, where we will present the outcome of the first quarter of 2025. Please go to slide two. I'm Pontus Budelsson, President and CEO of the company. With me, I have our CFO, Magnus Hansson, and our Head of Investor Relations, Erik Berggren. 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 first quarter. Please go to slide three. In Q1, we achieved solid growth, strong cash flow and improved margins. Customers are adopting our AI assistant. Usage of the AI assistant is increasing steadily and our customers become significantly more efficient. Net sales grew to 673 million SEK in the quarter. The organic growth was driven by strong online sales in Region North, including customer upgrades to our AI solutions, while offline sales in Region South were weak. The adjusted EBITDA margin improved to 26%, which is an improvement of more than three percentage points compared to Q1 previous year, a result of achieved synergies. Thanks to our strong operating cash flow in the quarter, leverage has improved to 2.4 times, well below our financial target. Let's move over to slide four. Our customers are typically renewing their annual online subscriptions primarily during the fourth and first quarter every year, generating strong cash flow for Kano Group. We are pleased with the strong cash flow in the first quarter. During Q4 to Q1, we have generated an adjusted free cash flow of 455 million SEK compared to 265 million SEK during the same quarter's previous year. Thanks to our synergy efforts, our margin are improving quarter by quarter. In Q1, we reached 26% in adjusted EBITDA margin. Our acceleration initiative has now progressed into Region South for additional synergy achievements and margin improvements. The legal market is progressing in the shift to AI supported solutions and our AI assistant is the leading AI solution for legal research in our markets. Our customers become significantly more efficient and in the next slide I provide a deep dive into the usage and sales. Next slide please. Usage of our AI assistant increases steadily thanks to significant efficiency gains for our customers. Once a customer has adopted the AI assistant, it becomes a daily collaborator for research and usage is increasing every month. A charming story from real life is this. thanks to our ai assistant a lawyer from a small law firm in sweden could identify a highly relevant argument that made him win in court against a large law firm with significantly more resources yeah our ai assistant attracts customers in all segments in q1 deloitte's swedish branch adopted our ai assistant they have since adopting it increased the number of licenses and expanded usage to additional departments thanks to significant efficiency gains. In May, we launched a major update to our AI assistant, providing additional customer value. The assistant now has an agentic workflow with, for example, multi-step questioning, refined searches and targeted answers. We have also developed the follow up prompt suggestion feature and users can preview our sources directly for higher efficiency. Our AI roadmap is ambitious, and we will launch additional customer value in 2025, including a specific solution for caseworkers in municipalities. Next slide, please. We are pleased to progress ahead of plan with the Region South synergies. The annual one-rate synergies amounted to 9 million euro at the end of Q1, as we have continued to deliver on all work streams. We reiterate our ambition to achieve annual run rate synergies of €10 million by the end of 2026. Next slide, please. In parallel, we also progress ahead of plan with our group-wide acceleration initiative. We have now initiated synergy harvesting in Region South. At the end of Q1, the annual run rate synergies amounted to €8 million. Our ambition is to generate cost efficiencies of 10 million euro with full effect on run rate basis at the end of 2026. Next slide please. In this slide you can see our two cost efficiency initiative running until the end of 2026 with the ambition of harvesting efficiencies of 20 million euro in total. At the end of Q1 we have achieved annual run rate synergies of 17 million euro. Next slide, please. I will now comment a little on our segment performance, starting with Region North. Region North continues to perform excellent, both in terms of growth and profitability. We deliver strong growth thanks to increased subscription-based online sales, including AI uplifts. Moreover, our EHS businesses continue to expand their customer bases, attracting new customers. Margins continue to improve mostly thanks to achieved synergies from our acceleration initiative, but also operational leverage from the increased net sales and product mix. The integration of the acquired carved out Schultz legal information business progresses according to plan. Next slide please. We progress with our business cases in France and Spain. Our French business generated solid growth in the quarter as we are attracting new customers. Our Spanish business has declined in the quarter as offline sales were weak. I am taking the necessary actions in Spain to address the weak offline performance. The Spanish merger is complicated and we can reap the full benefits of our strong local proprietary content. The merger is completed and during Q1 we launched the Infinita product, which contains all content from the merged business as well as AI functionality. We are pleased with the market response so far. The Spanish merger is completed. In France, the new versions of our three flagship products, all with AI, have generated strong interest from the market. Our efforts generate the expected returns and we are attracting new customers in France and expanding our customer base. In May, Guillaume Derrobet is leaving Counter Group. He has played an important role as entrepreneurial integration lead in Region South, successfully merging the two Spanish businesses and relaunching the flagship products in France. We are now in a new phase and moving forward, our country managers in Spain and France will report directly to me. 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 Q1, we achieved net sales of 673 million SEK, a net sales growth of 7%. The growth is driven by increased online sales, including selling more licenses to existing customers, upgrading customers to new packages, including AI packages, and attracting new customers. Currency effect had a negative impact on net sales of 0.4%. Furthermore, The acquired Cardart Schultz legal information business has contributed with 20 million SEK in net sales in Q1 relating to 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 negative growth in Region South. Region North had an organic growth of 7.7% thanks to strong online sales performance, while Region South declined 1.7% due to weak offline sales in Spain. Revenues from AI sales is increasing quarter by 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 19% compared to Q1 last year and accounted for 88% of the net sales in the quarter. In Region South, the online sales increased by 4% compared to Q1 last year and accounted for approximately 80% of net sales in the quarter. Please change to slide 15. Subscription-based sales increased during Q1 and represent 88% of the sales in the quarter. Please change to slide 16. The adjusted EBITDA amounted to 175 million SEK in the first quarter. This corresponds to an adjusted EBITDA margin of 26%, which is an improvement of more than 3 percentage points. Synergies are coming through as expected, meaning personal expenses are decreasing. Items affecting comparability amounted to 28 million SEK in Q1 and are related to the integration of Region South as well as the group-wide acceleration initiative. At the end of Q1, we have achieved synergies within the group of 16.7 million euros on an annual run rate basis. The effect in the quarter compared to baseline amounted to 3.6 million euros. We are progressing according to 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 to slide 17, please. In Q1, net sales amounted to 338 million SEK in Norwegian North. Organic growth was 7.7%. The growth is driven by online sales and we continue to strengthen our market position and attract new customers. Adjusted EBITDA reached 157 million SEC in Q1. This is an increase of 30 million SEC compared to last year. The adjusted EBITDA margin amounted to 46.6%. The improvement is due to three components. Efficiencies from the acceleration initiative, operational leverage from increased net sales, and product mix contributions. Please move on to slide 18, which is the region south segment. Net sales in Region South declined by 3 million SEK compared to Q1 of last year. Our French business continued to grow through online sales, whereas the Spanish business declined through weak offline sales. The adjusted EBITDA margin was 12% in the first quarter. We continue to invest in our French business to generate growth and have allocated AI resources for future growth throughout the region. Synergies are coming through according to plan. Compared to baseline, the cost has decreased by 25 million SEK. Apart from that, depreciations have increased by 3 million SEK compared to last year. The acceleration initiative is now picking up speed in Region South and we will continue to harvest additional synergies. Moving to slide 19. which presents the segment group functions. Expenses in Q1 was 23 million SEK. Exploratory AI projects for future customer value are included in operating expenses. Please go to slide 20. The adjusted free cash flow was 245 million SEK in the first quarter, which is an improvement of 138 million SEK compared to Q1 of last year. Our colleagues have made a strong effort renewing customer contracts during Q1 and we are pleased with the improvement. The leverage was 2.4 times EVTA last 12 months at the end of March, well below our financial target. I'm now handing over to Pontus again, who will present our last slides.

Thank you, Magnus. Please switch to slide 21. Our efforts generated strong cash flow and margins improvement in the first quarter. Our customers become significantly more efficient thanks to our AI assistant. We are benefiting our customers and advancing sales while achieving synergies across the group, improving margins and generating value for all stakeholders. We continue our efforts, helping our customers to become more efficient. In the beginning of May, We launched new value through AI and more will come during the year. 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.