Knowit AB (publ)

Ladies and gentlemen, welcome to the NOID Interim Report Q3 2025 Conference Call. I am Moira, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcasting. At this time, it's my pleasure to hand over to Per Valentin, CEO. Please go ahead, sir.

Thank you and warm welcome to this presentation of Nowit's Q3 report 2025. Well, with me, I have our CFO as well, Marie Björklund. So first, I would like to take you through some operational highlights in the quarter. As you see, we continue to improve your cessation in our three largest business areas, solutions, experience and connectivity, leading to a stronger margin than a year ago. see in insight that we continue to face challenges. Q3 is typically a soft quarter connected to management consultancy with delayed projects starting after summer. And this is a pattern that we see even clearer in the current weak markets. We continue to focus on work and work with our operational efficiency to ensure that we have a solid ground when we get back to organic growth. And thanks to the rapid AI development, we are able right now to deliver projects that includes new technology. And this opens up for a lot of new opportunities, both internally and at our clients. This is an entirely new play field that we are seeing evolving. Next slide, please, going into solutions. Our largest business area accounting for more than 50% of our total revenue, reporting net sales of 648 million SEK for the quarter. The EBITDA margin was 9.9%, improving compared to last year. And we are happy to see that improvement. And this is, of course, also a key factor for further growth in the coming years. Improvements are particularly strong in Sweden, while margins remain solid in Finland and Norway. Our main focus is to continue to deliver high-value products to our clients and get back to positive net recruitment. Of course, following hopefully organic growth. We see that projects including AI increases and expands the market. Next slide, please. our digital agency experience reported net sales of 225 million sec in the quarter with an ebitda margin of three percent an improvement compared to last year even if it's still very low we have a clear improvement in utilization driven by the development in swim we have invested and worked hard to enhance sales and leadership, which is playing off with several new deals in the quarter. Our focus going forward is to balance challenges in the price development with improvements in utilization to ensure persistence and increased profitability. We can take the next slide, please. Our business area connectivity reported net sales of around 190 million SEK for the quarter. EBITDA margin was 10.8%. It's a stable development compared to last year. We have worked really hard on efficiency and proactive sales, and we've been able to successfully replace lost projects with new ones. Utilization is increasing, improving, with room for, of course, for further improvements. And we have a long and strong long-standing relationship with our key, quite big key customers. And we continue to focus on growing together with them. We can take the next slide, please. Business Area Insights reported net sales of around 167 million SEK for the quarter. The margin was negative 6.5%. We are impacted by continued increased or internal restructuring in our operations. And as I talked about before, a slow start after summer. So the market uncertainty remains. We have... Experienced in this quarter, clients still postponing investment decisions. We see improvement in utilization in some areas, and some of the other areas remain burdened by lower demand. Our focus on building stability is through intensified sales and recruitment of competences in core areas such as cybersecurity and defense. And this is areas that actually are growing in insight. Well, and now I would like to turn over to you, Marie, going to the financials a little bit more in detail.

Next slide, please.

So back to the group as a whole, we delivered sales of approximately 1.2 billion SEC, a decrease of 8%, but when adjusted for perform of acquisitions, divestment and FX, it was minus 3%. We have more or less the same number of hours in this quarter, but fewer employees than the previous year. The average headcount during the quarter is down by 6%. The adjusted EBITDA amounted to 62.5 million SEC, up from 57.9 million SEC last year. The adjustment in this quarter concerns acquisition-related costs of 1.9 million SEC and a capital gain from our Danish divestment of 16.8 million SEC. The EBITDA increased compared to the same quarter last year, mainly for two reasons. Improved utilization during the quarter and efficiency gains. Our three largest business areas are all trending in the right direction. We still experience price pressure. As mentioned before, it has not been possible to fully compensate for salary revisions. However, with the increase in utilization, we managed to achieve an adjusted EBITDA margin of 5.1 in the quarter compared to 4.4 last year. So here we also have an increase. We see that the market remains challenging, fragmented, and competitive. But nevertheless, we have areas where demand is really good. As Per has also mentioned, defense, cybersecurity, data, and analytics, for example. and the clear focus has paid off this quarter. Solutions has improved utilization for more than a year now, and experience utilization is trending upwards for the third quarter in a row. All in all, utilization is slowly getting better for the whole group, and we deliver improved results, yet we know there is more to be done. We have the right competences, and have developed the capacity to shift them quickly when needed due to changes in the market. This, combined with our focused work on cost structure, leaves room for further improvements. Next slide, please. This slide illustrates our development over time as well on a rolling 12-month basis. Our adjusted EBITDA for the past 12 months amounts to 328 million SEC, showing that the negative trend has been broken. Revenue stands at 5.9 billion SEC with an EBITDA margin of 5.5%. As highlighted earlier, this marks a slight but important improvement compared to the rolling 12-month figures we presented in Q2, confirming that our actions are delivering results. Next slide, please. We currently have 400 million SEC-induced credit facilities. NOID has a total credit facility of $1.5 billion, with maturities in 2029 and 2030. Other liabilities, mainly related to leasing, amount to 420 million SEC. And this results in a total net debt of 608 million SEC. When divided by our EBTA of 511 million SEC on a rolling 12-month basis, our leverage is 1.2. Overall, we maintain a solid balance sheet and a good financial position, well within our financial target of not exceeding the leverage ratio of 2. Next slide, please. We have a solid platform and a strong position as a digitalization partner in the Nordic region. Having a broad footprint is a clear strength in tougher times, helping us to ensure stability. The share of revenue from the public sector is increasing compared to last year, mainly driven by positive development in Norway and our large framework agreements. The retail sector remains stable this quarter and continues to be our second largest segment. We note a negative development in the banking and finance sector, primarily related to the divestment of consulting services in Denmark. The decline in the telecom sector mainly relates to one major client that has reduced its share over the past year, not fully compensated by other assignments. However, we are now seeing that this client increases business with us again during the quarter. And last but not least, we continue to see a good growth in the defense sector. Next slide, please.

Thank you, Marie. To summarize, we see a continued positive trend in utilization across our three largest business areas, solutions, experience, and connectivity, yet with remaining upside. Important to be said. Activity levels are high, and we have secured several new assignments during the quarter. We remain focused on internal efficiency, sales, and client dialogues. Aligning price development with rising salary costs continues to be a challenge for us. We have to continue to work with that. Going forward, we will intensify our recruitment efforts to get back to organic growth. And as I mentioned before, we see how AI creates great opportunities to innovate together with our clients. This will expand the market. Thank you. And now we open up for questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Jeff Seymour from Anders Banken. Please go ahead.

Yes, hello. Good morning, Per and Marie, and congrats to the very good results in Q3 here. A couple of questions from me. Start with the public sector and some more positive commentary. It looks like sales is up 13% here year on year. So is this mainly related to... the downsizing that you have or do you actually see increased demand, higher budgets and higher budgets going into 2026? And what's your outlook here?

We see some early signs. I wouldn't say that we have enough accurate data points connected to the development of public sector, especially talking about Sweden then. But we see some early signs. And as we all can see, the overall budgets are in place for 2026. So I have good faith in that we will see increased digitalization budgets in some areas in Sweden as well. And that's very important, both for the development of Sweden and for the development of our our business is connected to public sector. As you know, in Norway, we have the last years won quite a lot of the new big contracts. So in Norway, since last year, we are really on track connected to public sector.

Yeah, and the main explanation for the increase is the Norwegian framework contract.

All right, thank you. That's good. And on pricing, relative to the salary development here, how big is the gap between the two, would you say, the yield? Are we talking like one percentage point, two percentage points?

Well, as you know, we don't disclose the hourly rates and not the salaries in detail, but We get a lot of questions if we were forced to lower the prices compared to last year. And if we just for currency, this is not the case. We do see a slight increase, but it is slight. And I would say if you weight the average salaries in the different countries, it's somewhere between 3% and 4% in Europe. salary increases and then you can do a rough calculation on that.

Okay all right thanks and on the net recruitment then you have been a little bit more cautious here but as we're seeing some more improving signs here in Q3 Do you think that you can come back to a positive net recruitment a bit earlier? You have highlighted somewhere in the middle of 2026 maybe we would see a positive net recruitment but do you think that, do you dare to speed this up now or will you remain cautious on this side?

I don't think it's appropriate for us to speculate too much in that right now. I think it the answer is pretty much the same as before that the main focus is to increase the utilization first and then move into net recruitment. And of course in Q3 we have net recruitment in some areas, some units of Norway and those are the areas with good margins already and good organic growth. So that's something that needs to be in place first. And then after that, we will slowly go into net recruitment. And I can't give you any more details.

Yeah. But as you know, the fourth quarter normally for our type of business is not a big recruitment quarter also.

Yeah. Okay. And that's everything from me. Thank you, Paramari. And good luck in Q4 here as well.

Thank you so much.

Thank you.

The next question comes from the line of Daniel Thorson from ABG. Please go ahead.

Yes, hi, thank you very much. First question, I missed the beginning of your presentation here, so I apologize if you already respond to this, but the utilization and group level has clearly stabilized throughout 2025. And you say that you see some improvements. How far off are we from a normal mid-cycle level in your view? And when in time could we be back to that level? Is mid-26 a fair assumption or is that too early?

Hi, Daniel. Well, it is several percentage points below what we aim for. And as you know, we really don't give any forecast, so we can't answer you on the question when we will achieve that. But as we said earlier during the presentation, there is surely room for further improvement. That's for sure.

Okay, fair enough. And then a question on the Norwegian market that has been quite strong relative to other Nordics last two years. It looks like that is starting to be a little bit more competitive. We see declines of some competitors there. How do you perform in Norway today and what do you think about Norway into Q4 and 2026?

Well, as you know, the last two years we have... been held up a little bit by Norway, and we still see good margins there. The big shift right now is that we see increased utilization in Sweden. So I think that we are performing well in Norway. The most important for us in Norway is our big frame agreements that we signed the last two years, and they are still there at least two to four years from now. So that's a clear answer on that question.

Okay, so no drastic decline in the Norwegian business?

No decline, no.

I see, okay. And then another topic to get back on the margin side is offsetting the office rental increases that we have seen during the inflation years here. Can you do that with less space, given that you have reduced headcount over the last two and a half years here? And when should we expect that you can do that? Because I guess that you have three- or four-year deals with property companies.

It will take one step at a time. But when we see possibilities due to the length of the contracts, of course, we take measures in every city. That's something that we always continuously do. Even 10 years ago, we did that. But it is a little bit special right now because we see that we are able to, due to that we are less amount of people right now and that we have quite different pattern of work than before COVID, we see that we are able to decrease the areas quite a lot in some places, but it will

evolve gradually the next three four years something like that yeah I would say on average I think most of our contracts are five years so there's still some some time left but of course we are very cautious of the cost so we're looking at the both the trying to price negotiate

But also, of course, reducing the... But that will be an upside coming three, four years.

Yes.

For sure.

Yeah, I see. That's clear. That's all for me. Thank you very much. And good to see a good margin quarter here.

Thank you so much. Thank you. For any further questions from the phone, please press star and one. There are no more questions from the phone.

Okay, we have a few questions from the webcast as well, coming from Joni Granqvist at Inderes. First question, can you elaborate on the customer demand in the different geographical markets and how you see the difference between public and private? Has pricing pressure eased in some pockets? Thank you.

Well, we talked a little bit about it. To start with Norway, we have... a good platform connected to the public sector. There is still room for us to grow in the private sector in Norway, especially connected to utilities and the defence industry. So, of course, there is a possibility for the future. Sweden, I think that... Sweden, on the market side, has been quite strong connected to the industry sector the last years, that's something that's a little bit softer right now, but we see a future increase in public sector, and that is, of course, much more important for us due to our size in public sector. And connected to Finland, I really feel that we are performing better, and we have talked about that, the earlier quarters as well, but we are performing better than average in the market, both connected to public and especially private sector. I'm really happy with the margins in Finland. Well, I hope that that's an answer. Otherwise, I hope that you continue to write.

Yeah, we actually have one more question from Joni Grönqvist. Have you seen more postponements and pricing pressure from the public sector now after summer as one of our peers is saying it's got much worse.

No, we haven't.

Good. There are no further questions here.

All right. Thank you for listening in and hope that you have a continuous good Friday. Bye.

Thank you. Bye.