Knowit AB (publ)

My name is Per and with me is our CFO as well, Marie Björklund. First of all, I would like to take you through some operational highlights during our first quarter. We continue the trend from Q4 with gradual improved utilization rates. Our largest business area solutions continues to show solid performance and lead the way for the rest of the group. We are happy that we've been able to stabilize the development in experience during the quarter. We have a continued focus on sales and client relationships, leading to investing in new interesting and new assignments during the quarter that we have signed. And we maintain, of course, our focus on cost awareness and efficiency. And that is very important to secure a continued positive development in these markets. We can take the next slide, please. Take a closer look into our business areas, starting with solutions. Our largest business area accounting for more than 50 percent of our total revenue reported net sales of 880 million sick for the quarter. The margin increased to 9.1 percent. And we are happy that the utilization rates continues to improve. This is an effect from the organizational work done over the past year. But the geographical differences remain. Norway's a more stable market, but we now see some slow but steady market improvements in Sweden as well. Next slide, please. Our digital agency experience reported net sales of 286 million sick in the quarter, with an EBITDA margin of 6.2 percent. We still meet challenges, but we are very encouraged over the stabilization of utilization rates that we have seen in the quarter. This is a step in the right direction. We see an increased client interest in Sweden, but from low levels. And the trend continues from the end of last year, which is promising. The plan for how to continue to improve experience lay firm. We can take the next slide, please. Business area connectivity. We reported net sales of around 208 million sick for the quarter, with a margin of 8.3 percent. We have had challenges in the quarter, mainly due to decreased demand in the telco sector. This has impacted the business a lot. We have made critical investments in our sales capacity, which is important to move back to organic growth. And we note strong interest from clients in this industry segment. And the pipeline looks promising for the rest of the year. Can take the next slide, please. Our management consultancy insight reported around 230 million sick for the quarter. The EBITDA margin was close to 6 percent. In insight, we continue to work to balance good demand in some areas with need of cost control and optimize the organizations in others. And as you have heard before, cybersecurity, defense and ERP systems remains areas where we show a really good growth. But we see that the demand for traditional management consulting services remains weak. And with that, I would like to... Next slide, please. And with that, I would like to hand over to you, Marie. We can take the next slide, please, again.

Thank you, Carl. So back to the group as a whole, we delivered sales of approximately 1.6 billion SEC, a decrease of around 10 percent. There's a negative calendar effect of the quarter. However, it is small. It's just one hour. Also notice that we are at the end of the quarter, 337 employees less than previous year. So the organic decrease in sales was expected. The adjusted EBITDA amounted to 104.5 million SEC for the quarter, a decrease compared to the same quarter last year. This leads to an adjusted EBITDA margin of 6.6 percent in the quarter. Last year, it was 7.7. So here we also have a decrease. We see that the market is still challenging. It's fragmented and competition is tough. But we do see some signs of improvements. Solutions is improving utilization since the second quarter of 2024. Experience utilization has stabilized. All in all, the utilization is slowly getting better for the whole group. We're working on our hourly rates and we managed to raise prices towards clients also in the first quarter, but not to the full extent to compensate for salary increases. Despite this, I want to stress that our main challenge and also opportunity for growth and improved margins is our utilization. We have the good potential to continue to increase utilization. We have the right competences and have done a hard focused work on our cost structure. However, fixed costs are harder to work on. Next slide please. This slide shows the development over time and also on a rolling 12 month basis. Our adjusted EBITDA for the latest 12 months is at 363 million and revenues at 6.2 billion at an EBITDA margin of 5.8. Next slide please. This is an overview of our net depth development. We have 500 million SEC in used credit facility and no one has a total credit facility granted of 1 billion 50 SEC. Future considerations amount to 18 million. Other liabilities, mainly leasing depths, amount to 470 million SEC. This totals a net depth of 625 million SEC and divided with our EBITDA of 508 on a rolling 12 month basis. We are at a leverage of 1.2. We have a stable balance sheet and a good financial position. 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. The share from the public sector is stable compared to last year, a positive sign as the share in this sector has decreased during last year. Competition, however, remains tough. We see that the retail sector continue to improve, potentially a consequence of general improvements in the economy. We have a strong and solid position in the industry sector, partly thanks to good development in the defense sector. The negative development in the telecom sector primarily relates to one significant client. All in all, clients remain focused on business critical projects, also in an economic downturn. With that, I hand back to you, Per. Next slide please.

Thank you, Marie. To summarize, we see a continued positive trend and stable delivery in our largest business area solutions, where both utilization and margin have improved during the quarter. We have also been successful in converting the pipeline and signed several new agreements in the quarter. We see improvements in experience with the stable utilization. We maintain our focus on sales and cost control. Of course, we are proud of our very strong position in the Nordic market as a partner connected to digital transition, particularly in the past growing segments like defense and cybersecurity. Well, with that, we are now open for some questions. Thank you.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You'll hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and 2. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Kee Ramon, Nordia. Please go ahead.

Hi, good morning, Per and Marie. A couple of questions from me. First, trying to get some more color on the utilization. Maybe when you look at each month in the quarter, do you see them trending in any direction from January to March across your four segments? Would you like to take

that,

Marie? They

are continuously improving during the quarter. In experience, they have stabilized, and that has been the case also over the whole quarter. We can see slight improvement, but it's very, very little in March. But it's going in the right direction.

Okay, great. I recall that in Q4 you said that your order book had grown slightly. Could you comment on how the order book has developed here in Q1 also?

Yeah, it looks good. We have many deals that we have signed and we're about to sign. However, it is yet to be seen in the figures. It's a little bit too early for that.

It's going in the right direction in a way, but yeah, slow.

Okay, so it's up from Q4? Yes,

it is.

Okay, perfect. And just a third and maybe final one from me. The other segment saw its costs increase sequentially from 21 million to 24 million here in Q1. Just looking at last year, I saw that Q1 had lower group common costs. So I thought it might be some seasonality pattern, but I'm trying to wrap my head around it. Was there anything unusual in the other segment this quarter that made the cost tick up?

I don't think that it's anything unusual. Sometimes it varies when the costs are coming during the whole year depending on when we do projects and such.

Got it. I'll get back in line. Thank you for answering my questions. Thank you.

The next question comes from the line of Daniel Gauberk, Handelsbank. Please go ahead.

Thank you, operator. Daniel Jubar here. Good morning, Per and Marie. Or perhaps not good morning, but hello anyway. Hello. My question is starting off a little bit again on the utilization trend per segment. You mentioned a bit that you saw experience stabilizing a little bit, a slight improvement in March and so on. Can you comment a bit more on where you have the toughest trends right now? Is it insight that is harder despite that you mentioned defense and cybersecurity and so on?

Yeah, that's right. Insight is shattered. There is one part of insight that's developing really good as we were talking about and the other ones is not. And of course we have had a quite tough quarter in connectivity connected to Telco as well.

Yeah.

And then Telco, is it more of the equipment and less of the service providers, I guess? Yes, that's right. Is that a structural phenomenon or is it more of, you know, project related?

I think it's been quite structural for a couple of years, as you know. Yeah. We are slightly optimistic for the future though. There is reorganization in some places and things are starting to pick up during 2025. But it's been a tough fall and a tough Q1 connected to that area.

Yeah. May I ask also on the yield between the salary increases and prices? Obviously we just heard from Teeto, for example, that they expect 45% salary increases for their group in this year. And so far we haven't yet seen the impact, obviously, from Sweden and Norway on pricing or salaries versus pricing. So I guess we are up for a negative yield, but is it possible to scope it? Is it, you know, 4 or 5% also as a negative yield between those two? Or can you work on demographic or whatever? Well,

I think we will land. Our expectations are more or less in line with what you talked about. Around 4% somewhere there is to be expected. And the hourly rates, I can't give you any detail from that, but they are lower as of right now and most likely that will continue.

But there is not a yield decrease so we don't misunderstand each other. It's going to be higher hourly rates, 25 than 24, but they are going to increase less than the salaries. May I ask

also,

sorry. No, sorry.

That's the situation. Perfect. May I take the last question? On the Easter effect in Q2, I guess it came late in the quarter, or in April I should say, not in the quarter. And Stockholm area had the Easter leave, I guess, on the Easter week and not the week after as it is some years. So a little bit on the impact on the Easter would be great to understand. Yeah, well

we have a negative calendar effect in April of 10 hours and that is just like the bank holidays. And of course there is also the holidays coming after effecting. We don't know to the full extent how much that is effecting. But it's 10 hours less in April, 3 in May and then all in all it's minus 8.

Perfect. Thank you and good luck here in Q2. Thank you.

The next question comes from the line of Ramil Korya, Lenske Bank. Please go ahead.

Thank you operator. Hi guys. A few questions from my side. Just first off on connectivity. I mean up until now, despite quite the weak revenue development, you've been able to retain margins and then into Q1 margins are coming down quite materially. Then you comment that you've been able to reallocate resources and now on the call you alluded to sales pipe etc. So I'm just trying to square all of these moving parts. Should we expect connectivity margins to continue to remain sluggish at say current Q1 levels or are we going to rebound imminently?

Well, I think that there are two things connected to this. One thing is of course the utilization rate. You won't get an exact answer to start with. But one thing is that we see a possibility to reallocate resources to other customers but also to new projects at the same customer. But we see a quite tough situation with the yield connected to some of those. So I think that we will see a better situation, a slightly better situation coming forward. But you have to take in consideration both utilization and the yield of those new projects. So it's going to be better.

Okay, that's clear. Thank you. And then on the topic of utilization improvements, I can see the line of reasoning and clearly it is supportive to margins. But then again it's also on the back of quite hefty headcount cuts. So how should we think of, what's your business planning in terms of utilization improvements on the back of an aggregate demand improvement across the entire company or the segments as such?

Well, to start, what we think is that we have seen now the last three or four quarters is a quite flat market. It's not started to bounce back up again. And we have adjusted as you know quite a lot connected to that. We think that we are quite done with those adjustments. We had some in the beginning of January. But the adjustments connected to headcount is much slower in February and March. So what we are trying to do right now is to increase recruitment in the good areas. In some areas connected to Norway, connected to defense, connected to cyber security, there are possibilities. So we are trying to focus on that as a start.

Okay. And then on the topic of recruitment, another 2% cut quarter over quarter and you said January there. How should we think of the progression of the employee base? You did allude to it but just maybe a little bit additional flavor if there is any. And then to that point, were there any severance costs that were abnormal in Q1?

Well, they are so low now compared to what they were in Q3 last year that we don't discuss them anymore.

No, it was a couple of millions but it's approaching normal levels in our business. And on the net recruitment of the quarter it was minus 88 and it was minus 60 in January. So January was high but we have come back to more normal levels in February and March.

Okay, that's very clear. And then just finally on perhaps sort of positive notes, the defense segment clearly demand is pretty big broad-based across all sectors really that supplies services or goods to the defense sector. But could you shed some light on your aggregate exposure to defense and maybe opportunities and difficulties that may arise in the reallocation of resources to defense? Is it easy or does it require additional certifications of resources and whatnot?

Well, to start with the reallocation, we have the sources to do that. It's not easy but we have the competence and the sources to reallocate. But it takes time, around six months or something like that. So that's a possibility and we're working with that all the time. And we are growing quite fast in the defense sector. Still it's a small part of our business and as you know that's why we don't disclose it still. So but it is sooner or later that will eventually happen depending on the continuous growth of the area.

Yeah, it requires some work from our side and we are considering disclosing it to exact numbers in the report. But as I think we've said before, it's a little less than around five percent.

That's very clear. Thank you so much both. Thank you.

As a reminder to ask a question, please press star and one. We have the next question from Daniel Torsten, ABG. Please go ahead.

Yes, thank you very much. Another question on net recruitment here. What are your plans if you can share those for Q3, the important recruitment quarter but also the second half of 2025. But also if you haven't really set those plans, what signs are you awaiting before you decide if it's going to be a big positive program or a bit more cautious program?

As you know, we are a decentralized organization so the plans are going to look quite different in different countries and different segments and business areas. But if you aggregate that to some extent, I think that it's a little bit early to say that we have a really clear plan of what's going to happen in Q3. We are ramping up for recruitment in quite a few of the growing areas off of it already. In some of the others where we maybe see a flatish utilization, we are waiting a little bit to see that the trend is upwards connected to utilization in Q2 to hit the button for Q3. So that's, well of course it sounds like common sense but that's how we are trying to do it.

That makes sense. So we will hear some more comments in Q2 I guess on those important segments. And

as you know, we don't exactly know what's going to happen in the environment right now. It's quite shattered. Personally I think that we will see some positive trends connected to the public sector and the public sector is very important for us. What we are waiting for is to see the development in for example the industry segment and some other segments to see what happens there.

That makes sense. And then secondly a question on Norway here. It sounds like you are a little bit more conservative than recent quarters on your comments. You say that the market is stable. When I look at sales they are down 1% year over year. In Norway I guess it's affected both by effects and the Easter effect to a larger extent than in Sweden. But do you mean that the market is stable in terms of as strong as before or has the market weakened somewhat to just be stable now versus last year for example? No,

the market is not weakened since we talked last time. I would rather say that it's a little bit better. Maybe we should express it more as stable than it's much better because it's slightly better.

So it's stable in terms of still strong. That's all from me. Thank you. Thank you.

Thank you.

There are no more questions from the phone. All

right. We have a couple of questions from the webcast. Actually I think we may have already covered them but I'll read them up anyway and then maybe if you want to add some on that. First one is from Sven Svensson who is wondering if there are any plans for further reductions or is Norway moving into a growth phase now? And clearly connected also to a question from Marius Hegerdal which is the number of employees down a lot since peak in 2022. When do you foresee that you will increase recruiting again?

Well, yes, that's right. And the start for that process is of course not continue to decrease and that is something that we have stopped. So maybe now it's a situation where we don't decrease in a little bit more tougher areas and we start to recruit in the growing areas. So I would like to say that we are in that mode already but it is going to be a little bit chattered depending on the demand in different areas and it's going to be quite slow.

There are no more questions from the webcast.

All right. Thank you very much.

Thank you.