Knowit AB (publ)

Welcome to this presentation of NOIT's report for the second quarter. My name is Per Valentin and I'm the CEO of NOIT and with me here today I also have Marie Björklund, our CFO. We can take slide three please. First I would like to take you through some operational highlights for the quarter. The trend of more stable utilization remains and we are pleased to see that the adjusted EBITDA is improving for the first time since Q1 2023. This is mainly a result of the cost reductions and organizational changes that we have implemented the past year. We now see signs of improvement in utilization in certain areas although work on efficiency and optimization of the organization remains. We note an increased dialogue among some clients while others remain cautious and the competition in the market is still intense. This means that we don't expect a quick turnaround in 2024. Sweden remains our most challenging market but we do see some improvements in certain parts even in Sweden. In Norway we have a more stable development based on strong partnership with several clients as well as signs of growth in the public sector. Denmark shows a positive trend while Finland and Poland are stable. Next slide please. We will now take a look at our business areas more in detail starting with Solutions, our sales of 933 million SEC. The EBITDA margin increased to .3% improving compared to last year following improved utilization rates and intense work with efficiency and to optimize the organization. We notice some signs of increased market activity but we see intense competition in almost all new assignments. Margins in Finland and Norway are on good levels while Sweden and Denmark needs further improvement. We can take the next slide please. Our digital agency Experience reported a net sales of 320 million SEC. The EBITDA margin increased to 6%, a small improvement compared to last year but still on a low level. Experience faces the largest challenge right now in the market and it was the same in Q1 if you remember. We have a positive margin development in Norway, Denmark and Finland but Sweden still underperformed due to low demand. Work to reduce cost and capacity to adjust the organization will continue in areas where we see that it's needed. In parallel we focus on developing client relations and our offer to ensure that we have the right competence mix when the market turns for the better. We can take the next slide please. Our business area connectivity reported net sales of around 207 million SEC. EBITDA margin in line with last year 8%. The market is highly competitive and we have worked intensively to adapt and optimize the organization to meet the current demand and that has shifted quite a lot in different customers as well. We have a very solid position in the industry segment and this is the key to be able to continue to deliver strong results despite the current market weakness. We see good activity in several areas and we are able to secure interesting new assignments in the market. For example in the defense industry. We continue to work with organizations and to reduce cost in combination with active client dialogues. Thanks to our ability to adapt faster changes in client demands we still have a good utilization level in the business area. We can take the next slide please. Going into our management consultancy insight reporting net sales of around 233 million SEC. A slight growth compared to Q2-23. EBITDA margin was .5% somewhat lower than last year. This is a consequence of the utilization rate still being on a low level. In Sweden and Norway we now have a stable development but the quarter is burdened by weaker development in Finland where work remains to build the right foundation for further profitable growth. I am very proud that we are able to also the tougher times overall to continue to invest in growth for example in cyber security and defense in the business area. The trend for the first quarter with an improved demand for general management consulting services remains also in Q2. We can take the next slide please. And now I would like to turn over to you Marie who will take us through some financials in more detail. Next slide please.

Thank you Per. Before going any further I want to comment on the fact that we have an adjusted EBITDA this quarter. We made a provision of 28 million SEK related to the decision of the Swedish agency for economic and region growth Tillväxtverket in Swedish on repaying of support for short time work that we received in connection to the COVID-19 pandemic. We do not share the view and we have appealed the decision to the administrative court in Stockholm. And since this does not reflect the underlying business of NOIT we are instead following the adjusted EBITDA and the adjusted EBITDA margin. And since I got a question this morning I want to emphasize that the adjustment of the 28 million SEK is only concerning the support nothing else. So back to the group as a whole we delivered sales of approximately 1.7 billion SEK a quarter increase of 4.4 percent. And there is a positive calendar effect of the quarter of 11 hours but also notice that we are end of the quarter 250 employees less than previous year. So revenue per FTE is increasing. The adjusted EBITDA amounted to 94.2 million SEK for the quarter and this is an increase compared to the same quarter last year. And this leads to an adjusted EBITDA margin of 5.6 percent in the quarter. Last year it was 4.4 percent so here we also have an increase. And yes there is the calendar effect but also the effect of currency and restructuring and including these items we actually still have an improvement since last year. Restructuring costs in the quarter amounts to 21 million SEK. The effect of dismissals of 70 employees due to low utilization. And savings are continuing this quarter amounting to 9 million SEK. And this is according to plan and includes conferences, events, travels, marketing and more. And as Par said we see that the market is still challenging and there are some small signs of improvement but competition is tough. Hourly rates increased towards last year still however they are under pressure. Next slide please. This slide shows the development over time also on a rolling 12 month basis. Our adjusted EBITDA for the past 12 months is at 453 million and revenues at 6.8 billion SEK at an adjusted EBITDA margin of 6.6 percent. As you can see we have an increase of the adjusted EBITDA on a rolling 12 month basis for the first time since Q1-23. And that is of course encouraging because it means that the hard sales focus together with cost awareness have given results. Next slide please. This is an overview of our net debt development. We have 500 million SEK in used credit facility. Now it has a total facility granted of 1.5 billion SEK. Future considerations amount to 26. And other liabilities which is mainly leasing debt amount to 530 million SEK. And during the quarter this amount is more or less unchanged and that is because amortization is even out with a new contract. And this totals a net debt of 917 million SEK and divided with our EBITDA of 600 million on a rolling 12 month basis we are at a leverage of 1.5. We have a stable balance sheet and a good financial position. And also this means that we are well within our financial target which is set not to exceed 2. Next slide please. We have a solid platform and a strong position as a digitalization partner in the Nordic region and having a broad footprint is a strength. The share from the public sector has decreased compared to last year. Following a softer demand in some areas compared to a year ago. The demand within defense remains strong. In the quarter we also have a strong growth from certain clients in the retail segment impacting the overall figures. It is however difficult to draw any conclusions on a long term basis from just one quarter. I remind you. We have a strong and solid position in the industry sector allowing us to actually grow despite challenging market conditions. And clients remain focused on business critical projects also in an economic downturn. So I leave it back to you Par to say some final words before we take on questions. Next slide please.

Thank you Marie. Well to summarize. The stabilization continues in Q2. This means that most data points shows a positive trend but we still have a way to go before we reach local levels of utilization and profitability. In some areas we now see signs of market improvement but we need to continue to work with optimization of the organization in other areas especially as we mentioned in Sweden. And the geographical market differences remain Sweden, Norway and we think that that will continue during 2024. And with that we are now open for questions.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. We have our first question from the line of Stukemo Jasper from Handelsbanken. Please go ahead.

Yes, good morning. Hi, Pär, Marianne, Annika. My first question is regarding the calendar effects here. You mentioned 11 hours for Q2. But how much did this contribute to sales and EBITDA? And I guess we have the largest swing from Norway here which is 30% of sales. So could you also just remind me in which business area you have the largest exposure to Norway? Is it experience? Thank

you. Maybe you should elaborate on this part too.

It's 11 hours in the quarter and we don't disclose how much that is in amount. But as I said there is the calendar effect and then you have the currency and we also have restructuring of 21. And as I said if we include this we have an improvement since last year. And then maybe you can sort of calculate how much that is from that information.

Okay, thank you. And on the Swedish market here it seems a bit challenging. Whereas you're seeing improvement signs from the public sector in Norway. But if you look at the Swedish regions and municipalities here do you see actually some improvements in a few certain areas? Or could you perhaps elaborate a little bit on the Swedish market across here?

Well we don't see a sign of improvement still in the public sector in Sweden. I hope and think that that will come in 2025 as we have talked about several quarters before. But the autumn is as it is. So we are more talking about different other segments like the defence industry. We see some stronger activities in the industry segment etc. So it's more like that.

Alright, thank you. And on the improved utilization in a few areas is that also only related to cyber security and defence in connectivity and insight? Do you see any improvements here?

It's more broader but I have to emphasize that that is not connected to the market development. It's more connected to our own optimization.

Alright, that's very clear. Thank you. I get back in line.

Thank you. A reminder to all the participants. If you wish to register for a question please press star and one on your touchtone phones. We have our next question from the line of Ramand K from Nordea. Please go ahead.

Hi Per and Malerik. Good morning. Two questions from me. First one, you said our early rates have increased but are under pressure. Just curious if the choice stands between retaining your margins versus gaining sales and a new project and higher utilization. How do you prioritize in that situation?

Well, it is more data points than those three. We always think about the long term possibilities in addition to that. When you add that data point about the possibilities for the long term development in that certain part of the business if it's a region or an industry or a small segment of the market it's quite clear how we will prioritize.

It's a balance that we make for each project to see if we want to prioritize to take on the new project and what pricing we are able to accept.

Right, got it. Another peer in the sector reported that they saw positive utilization improvement sequentially across Q2. Is that a positive trend that you've been observing throughout Q2? I understand that the market is not improving but in your organization that your efforts are stepping up?

Yeah, that is what we are experiencing. We have a small increase in utilization and it has been during this quarter, month per month.

Okay, perfect. I'll get back in line for now. Thank you.

Thank you.

Thank you. Ladies and gentlemen, that was the last question on the phone. I would now like to turn the conference back over to Annika Bilbo who will read out the written questions.

Thank you. Actually we don't have any written questions today so I suppose we're then done for today. Thank you. Thank you so much.

Thank you all for listening in and see you after summer. Thank you very much.