Knowit AB (publ)

Hello and welcome everyone to the Know It Interim Report Q2 2026. My name is Becky and I will be your operator today. All lines will be muted throughout the presentation portion of the call with a chance for Q&A at the end. If you wish to ask a question in this time, please press star followed by one on your telephone keypads or submit a webcast question via the questions tab. I will now hand over to your host, Per Valentin, CEO to begin. Please go ahead.

Hi everyone and a warm welcome to this presentation of Nowitz's report for the second quarter. With me today is our CFO Marie Björklund and also Fredrik Ekerhout who will take over as acting CEO from 1st of August. First some operational highlights in the quarter. We are very pleased to report improved adjusted profitability and margin compared to the same quarter last year. Our operational efficiency continues to deliver results with actually six quarters after each other of improved utilizations. At the same time, the market remains mixed Customer activity is improving, particularly within the public sector in Sweden. However, decision-making processes are still slow, which especially affects businesses with shorter project cycles. As reported in previous quarters, demand remains strong in areas such as cybersecurity, defense, ERP, and digital transformation. And after a long period of investing in further future growth areas, and at the same time running efficiency measures in areas where we have been shrinking, our focus is now gradually shifting towards profitable organic growth. AI is a key driver to the next phase of Nowitz development. We are integrating AI into all our client offerings, making them even more relevant going forward. In addition, we are using AI internally to improve both productivity and quality. And with that, I would like to officially welcome Fredrik Ekerhård, who will take over as acting CEO 1st of August. Fredrik and I have worked closely together for many years, and I know him to be a strong leader with a deep understanding of Knowit our business and of our culture, and I feel very confident that he will guide the company successfully through this exciting and probably quite long period of transition towards AI in the future. Fredrik, I will hand over to you to say some words. Next slide, please.

Thank you very much, Per, and also thank you for the collaboration over the past few years or more than a decade maybe. I have great respect for what we have built together, Per, and I look forward to build on that foundation going forward. Having worked closely with both experience and solution during more than a decade, I have a clear view of where our greatest strengths lie. First and foremost, it's our people and our culture. The way we collaborate, take ownership and work closely with our clients is a real competitive advantage and something I want to continue to build on. Second, we have strong capabilities in areas such as AI, data platforms, defense and cybersecurity. Areas where demand is growing and where we are well positioned to create value for our clients. During this transition period, my focus will be on helping the organization build on those strengths while continuing to improve our operational performance. We will continue to focus on creating long-term profitable growth by being the leading digital transformation partner for both Nordic companies and public sector organizations. My role is to ensure a stable and focused transition while continuing to execute on that strategy. With that said, I will be available for questions both today and going forward. Next slide, please. We will now take a look at our business areas in more detail. And since I'm currently the business area manager of Solutions, I will take the opportunity to present the first of our five business areas. Solutions is the largest area accounting for nearly 50% of total revenues. We report a net sales of 693 million SEK for the second quarter. The beta margin was 6.9% in line with the same quarter last year. We are able to maintain our margins through improved operational efficiency and continued focus on utilization and cost discipline. Our operations in Norway perform very well while we are still faced with some challenges in Sweden. We have continued to strengthen our position in strategic growth areas, particularly data platforms and cloud, where demand remains solid and we continue to win new business. As the organization become more efficient, our focus is increasingly shifting from operational adjustments to profitable growth. We are well positioned to capture opportunities as market conditions gradually improve. Currently, the market remains mixed. We see increased client activity, a healthy pipeline, but decision-making processes are still slow and price pressure remains. Overall, we believe the underlying trend is moving in the right direction. Next slide, please. Back to you, Per.

Thank you, Fredrik. And going into our digital agency experience, reported net sales of 270 million SEK in the quarter with an EBITDA margin of 6.1%. A significant improvement compared to last year. I'm really happy to see experience returning to positive organic growth this quarter, driven by higher utilization in Sweden. A more stable price price environment and also continued improvements across the business. In Norway, as you remember from Q1, the measures implemented during that quarter have had intended effect and the business has returned to much stronger performance. Looking ahead, we see significant continued opportunities in the intersection of AI data and customer experience. And note that this area was the area where we first struggled with AI connected to UX development three years ago. As our clients prepare to create new digital business models, Experian is really well positioned to support that transformation.

And AI is

becoming an increasingly important part of both our client offerings and the way we work internally. It will strengthen or already strengthen our competitiveness, enabling new services and creative, attractive growth opportunities for the future. Next slide, please. Moving over to business area connectivity, reported sales of 144 million SEK for the quarter. EBITDA margin was 5.7%, a strong improvement compared to last year. Another strong quarter with positive organic growth and a significant improvement in profitability. The business continues to benefit from a good momentum, particularly within the defense sector where we have continued to win strategically important contracts At the same time, we remain focused on broadening our customer base, reducing dependence on individual clients, create a more balanced business, and strengthen our resilience over time. In Sweden, market activity is gradually improving, and we managed to create a stronger pipeline than earlier during this year. Pricing pressure remains in certain segments. The overall trend is positive, and we believe connectivity is well positioned for continued profitable growth. Next slide, please. Moving to our management consultancy, Insight, reported sales of around 235 million SEK and an EBITDA margin of 3.7%, slightly below last year. Insight had a weak quarter, reflecting continued cautious customers' behaviors and slow decision-making, particularly within traditional management consulting. This has resulted in lower utilization and profitability. Demand remains strong in areas such as ERP, cybersecurity, and defense, where we continue to invest in growth during the quarter. And this quarter we have actually also secured some strategically important ERP transition projects strengthening our position in this area for the future. And I think it's worth noting that our business mix has changed significantly over the past few years since 2023, our traditional management consulting business has declined by 25%. That's a lot. While cyber security and defense business has grown quite a lot. In addition, ERP has become a new strategic offering that was not part of our portfolio at that time. So during this recession, we have been able with tough results to transit into new growth areas. We continue to adapt our task base to current market conditions while investing in capabilities needed to support further growth. Next slide, please. Moving to our newest business area product, reported sales of around 100 million SEK for the quarter. EBITDA margin was 10.4%. Well, products deliver another strong quarter with solid organic growth driven by good performance. Demand remains particularly strong within defense and security and mobility. During the quarter, we secured several important new contracts, which even further strengthens our pipeline. Profitability was somewhat impacted by delayed projects, starts within bank and finance, but these are timing-related effects rather than a change in demand, and we continue to see good long-term opportunities. With that said, in just the last few days, we have secured another significant contract within the bank and finance area supporting this. Looking ahead, the journey of profitable growth continues for products. Next slide, please. And over to you to elaborate a little bit on the financials, Marie.

Well, thank you, Par. We can take the next slide, please. So back to the group as a whole. We delivered sales of 1.43 billion SEC in the quarter, a decrease of 3.8 compared to last year. Excluding the effects of acquisitions and divestments, sales were down by 0.9%. while currency had a positive impact of approximately two percentage points during the quarter. The number of working hours did not have a material impact compared to last year, and the average number of employees during the quarter was down by 6%. This means that the underlying revenue development was supported by continued improvements in utilization, despite lower capacity. The adjusted EBITDA amounted to 61.5 million SEC compared to 54 million SEC last year. The adjustment this quarter relates to 38.5 million SEC of costs associated with the CEO transition. The improvement in the underlying earnings was mainly driven by higher utilization together with continued operational efficiency improvements across the group. and we do still experience pricing pressure, and it has not been possible to fully compensate for salary increases through higher billing rates. However, the continued improvement in utilization enabled us to increase the adjusted EBITDA margin to 4.3 percent compared to 3.6 percent last year. Next slide, please. This slide illustrates the development over the last couple of years. And as you can see, revenues declined as the market weakened during 2024 and into 2025. However, the trends become much more stable over the last few quarters. And in the second quarter of 26, the underlying revenue development was close to flat when adjusting for acquisitions and divestments. supported by improvements in utilization. On the profitability side, the picture is more encouraging. During the past year, we have focused on improving operational efficiency, increasing utilization, and adapting our cost base to the market. Those actions are now clearly reflected in the quarterly adjusted EBITDA, which has improved despite continued challenging market conditions. While the rolling 12-month adjusted EBIT days is still below historical levels, it continues to reflect the weaker quarters from last year. And our ambition is to continue improving the underlying quarterly performance, which over time should also be reflected in the rolling 12-month figures. And moving on to our financial position. We currently have 166 million SEC of our committed credit facilities utilized. NOID has total committed credit facilities of 1 billion 50 million SEC with maturities in 29 and 30. Other interest-bearing liabilities mainly related to IFRS 16 lease liabilities amount to 531 million SEC. As a result, total net debt amounts to 528 million SEK. This also illustrates that virtually all of our reported net debt relates to IFRS 16 lease liabilities rather than financial borrowings. Our net debt to EBITDA ratio is 1.1, which is well within our financial target of a maximum of 2. And excluding IFRS 16 leads liabilities, our net debt to EBITDA ratio is zero, highlighting the strength of our underlying balance sheet and financial position. And overall, we continue to maintain a healthy balance sheet with significant financial flexibility. I see that the slides are jumping a bit, but we can take the next slide now. All right, so on our sales per client segment, it shows that we have a solid platform and a strong position as a digital transformation partner in the Nordic region. And having a broad customer base across industries continues to be a clear strength in today's market environment. The share of revenue from the public sector has increased to 42% compared to 37% last year. This is mainly driven by continued positive development in Norway and large framework agreements. Retail and industry remain relatively stable, somewhat decreased, but providing a solid foundation in the current market. At the same time, we continue to strengthen our position in areas where customer demand is strongest. And as Per mentioned, we see especially strong demand within AI, data, cloud, cybersecurity, defense. And we continue to invest there and build our capabilities. And last, but certainly not least, the defense sector continues to grow and now represents 6% of group revenues compared to five last year. We continue to see good opportunities within this strategically important market. Overall, our diversified customer portfolio provides resilience, and it also leaves us well-positioned as market conditions gradually improve. And with that, I hand over to you, Per, and we can take the next slide, please.

Thank you, Marie. Well, to conclude, we made good progress during the quarter. We delivered improved adjusted profitability and margin. The operational measures implemented over the past years continues to deliver results. While we remain disciplined on cost and operational efficiency, our focus now gradually shifts towards profitable growth. During the quarter, we continue to invest in areas where we see the strongest long-term opportunities, including defense, AI data, and cybersecurity. That's very important to continue to invest. The market remains mixed. Client activity is improving, and we see a healthy pipeline. But note that we have invested heavily in sales the last years in connection to that. With that said, decision processes are still slow. This affects insight, where projects are shorter and more sensitive to delays. And finally, 1st of August marks the beginning of a new chapter for Knowit, as Fredrik assumes the role as an acting CAO. For me personally, this marks the end of an era. It has been a privilege to lead Nuit and I'm really proud of everything that we have accomplished together during all of these years. I really have to say that I will leave the company in confidence that the team will continue to build on that foundation. I think that the next years will create really interesting opportunities. AI in combination with the end of the recession will create a lot of creativity, both within Knowit and especially connected to what our customers are aiming to do in the future. And with that, we are now open for questions.

Thank you. If you wish to ask a question, please press star followed by one on your keypad now. If you feel your question has been answered or for any reason would like to remove yourself from the queue, please press star followed by two. When preparing to ask your questions, please ensure your device is unmuted locally. If you have joined us on the webcast, you may submit a written question using the questions tabs located above the slides. Our first question comes from Jesper Segemo from Handelsbank. Your line is now open. Please go ahead.

Yes, good morning, Maria. I hope you can hear me.

Yes, thanks.

Yes, I have a few questions. If we could start with just products, I'm a bit more curious around it. Could you give some more color on the use cases that you see, how generic the platform is? And how wide can it be deployed throughout the organization and your divisions, etc.?

Well, within products, we have around seven or eight different quite narrow segments of deliveries where we, as you know, since before, combine our own assets with consultancy. And that is something That way of working is something that will continue to evolve, of course, during the years connected to AI. For one example, the business case is really good for the future, connected to the cost of creating that own asset. The cost for that is going down, and the need for personalization specific personalization towards different customers is increasing. So I think that more and more of our other business areas are looking into those possibilities of creating own assets, and maybe some of them will be as structured as we have in products, and some of them will more be some sort of a small add-on.

All right, thank you. And on the product margin that is slightly down, I think this was mainly related to some project delays you were writing in the report. But do you expect this to be visible to come back already in Q3? Or could you say something around the magnitude of the delay?

Well, our thought is that at least if we look at the full year 26, it will be better than the full year 25. There are a lot of possibilities in the pipe when we are taking new contracts. But I think that we, and probably you as well, need to look at products a little bit differently now. due to that it is quite big projects and long-term projects. So they will shift a little bit more, but long-term they will be more stable. So we are confident going into the autumn.

Yeah, just to add to that, just to say that we really see the potential in this business area to have higher margins, to be... maybe the highest in Norway, and as Per, you're saying as well, we think that it will improve during the fall compared to the first half of the year in 26.

Okay, great. That is clear. And how much was the restructuring in ERP capacity in the Insight segment in Q2 here, and is it expected to have an impact on H2 as well, or... Yes.

Well, we don't disclose details in restructuring costs. Of course, we have restructuring costs within the whole group in Q2 as we had the last year. And I think that if there is something significantly special, we will talk about it. Otherwise, we will just continue to restructure where it's needed. As we said, the traditional management consultancy is coming down and will probably continue to come down a little bit in the future, at least in H2. And we will continue to grow ERP and cybersecurity and defense. I think that that trend will continue for a while. And I think that's really healthy.

Yeah, and the difference in restructuring costs, it's not material in this quarter, and that's the reason why we did not mention it. There's no material difference compared to the same quarter last year.

Yeah, I see. That's fair. And looking at the public sector, it looks like it was some 5% growth year on year. Is this mainly related to solutions, or is it broad-based by regions, or is it more tilted towards Sweden or Norway?

I didn't catch the part. Did you say the revenue increase in the public sector?

Yeah, exactly. It looks to be up 5% year on year.

Yeah, I would say it's mainly driven from Norway and large frame agreements.

Yeah, okay. And given that we've seen some higher prices on hardware, do you see any indication that it could impact the public IT services demand in H2 or 2027 or What's your reading to that?

I think that it has already affected for quite a few years now not only the higher prices on hardware but also the lower budget. Now we see public sector budgets are coming back a little bit. Of course some of that money will go to licenses and hardware but there will be opportunities connected to consultancy, more opportunities than the last three years. So of course it is affecting, but I think that there will be budgets for both.

Yeah, okay, great. I think that's all for me. So I wish you guys a really nice summer and especially you, Per, and big good luck here in the future.

Thanks. It will be a little bit longer summer than usual for me, so I'm happy about that. Thanks.

Thank you. We currently have no further audio questions, so I'll hand back over to the management team for any written questions.

Yes, and we have a question from Ross Jobber at Edison Group. Can you provide further details on utilization improvements in the first half? of the year. Are there improvements across all customer sectors and to what extent do you believe that generative AI can positively impact on this specific KPI in the future?

Yes, we don't give exact number on the utilization as you know, but as Per mentioned, we have increased the utilization. This is the sixth quarter in a row that we have improved utilization. And there's still room for improvement here with several percentage units. And if we raise the utilization by 1%, it means more than 55 million SEC in EBITDA on a yearly basis. So I just first want to say that we still have a lot of potential in the utilization. And yes, I would say that it's fragmented over customer sectors. We don't comment on specific clients, but it's pretty fragmented. Of course, I would say that public sector has increased, but otherwise fragmented. And what was the second part of the question?

It was... To what extent do you believe that generative AI can impact the utilization KPI?

Yes, of course, as we've said, we believe that generative AI is really an advantage for us, and we think that there will be a high demand in connection to that when we look a couple of years ahead. And of course, if there's a big demand, that is positive for both utilization, but I mean also for prices as we are experiencing pricing pressure now. But when demand increases, there will probably be potential there as well. Par, I don't know if you want to elaborate a little bit on that.

Thank you, Marie. I really agree about the possibilities. I assume that the question is a little bit about the threats connected to AI as well. And with that said, we have areas. One good example is that we also talked about a little bit in the report experience our digital agency where we saw a really big decline in utilization three years ago connected to UX and the ability to use generative AI to produce that code much more efficiently. And we've seen that in many other areas as well already. But with that said, it is a strength of knowing that we try to build a system or a structure where we are really good in change fast. So within experience, for example, we have been able to change towards new growth areas with the customer journey connected to AI and, well, almost no UX development because that is made by AI. So it is both, of course, but that is something that I said in the end of my presentation. The end of a recession that will come sooner or later in addition to all the new possibilities that our customers see connected to AI will drive a lot of thoughts of change business models, more personalization, higher security. new ways of working, maybe new organizational structure, etc., etc., and that will drive a lot of new offerings, making us more efficient connected to utilization. That was quite long, but maybe that was the last question.

We have one more, actually. All right. Thank you. at AAT Invest in Norway. When do you believe we will start to see organic growth in number of employees again for Nowit?

Well, the main focus right now is to see organic growth, as we said, or connected to EBITDA and connected to top line. As you see this quarter, we continue to shrink with around 100 people. Step number one in H2 is to get back to flat. And then after that, flat in amount of people and hopefully increase in amount of money. And after that, the next step is to, of course, to continue to go with people. But we also see that the focus is, for example, connected to products. It's not to grow that much with people, much more with new opportunities connected to AI. But we are getting more close than ever connected to organic growth of people as well.

And just to add to that, we are recruiting. We have been recruiting this whole time. and so far this year we have welcomed over 200 new employees and we will welcome new employees as well in the third and the fourth quarter so we do have a recruitment focus it's just that we haven't gotten back to to the net recruitment positive but it's also we have been able to reduce the overhead ratio so We will of course try to grow when it comes to consultants, but still with the overhead focus, this means that we probably will be able to reduce the number of overheads.

And one flavor connected to that is more senior and more younger employees. For a couple of years now, we have mainly hired more senior employees because that's been easier to having projects together with the customers. But now we see that we are starting to hire younger employees, especially in products, but also in other areas. Again, I think that's really important to be able to do that, both to get new ideas and new opportunities into the system, but also to get a better mix connected to prices and salaries. So that is very important for us to continue to do.

Great. One more question from Ross Jobber at Edison Group. Second half of this year, see any difference to the first half in terms of the value of any significant framework agreements that either mature or come up for renewal?

No, nothing significant. No.

Good. I believe that was the last question, so pass some final remarks.

Yeah, well... Thank you for all of those years and over and out for me. Thank you.

Thank you. This concludes today's call. Thank you all for joining. You may now disconnect your lines.