TietoEVRY Oyj

Good morning and welcome to Tieto's first quarter 2026 earnings webcast. My name is Tommi Järvenpää, the head of investor relations at Tieto. In Q1, we delivered strong profitability and solid performance in software businesses. This morning, we will present our financial results for the quarter and provide an update on the progress of the strategy execution. After the presentation, we will open the line for questions. With me here are our CEO, Enre Rangnäs, and CFO, Tomi Hyröläinen. And now I will hand over to Enre. Go ahead.

Thank you, Tomi, and welcome then to TITO's Q1 2026 presentation. I would say that we have clearly been through an eventful quarter with execution of over four strategic priorities and then also coupled with the market development. And as part of this, we clearly see strong momentum from the rapid adoption of AI across the line. And at the Tito, we regard this as a clear opportunity AI is an integral part of all our businesses and is already helping us create value and to drive efficiency. In Q1, we again see the effects of the cost efficiency program implemented last year. So I would say also despite the challenging market conditions, we have improved the profitability by more than four percentage points. If you look at Q1 26 versus Q1 25. So we continue to move forward towards our 2028 strategic ambitions and goals, which was also communicated in connection with capital market stay. I would also remind you about our strategy. So our ambition is to become European software and tech consulting market leader within selected industries and niches. And then we are executing this through four main strategic priorities. Number one, customers first. Second one, simplified core. Thirdly, selective expansion internationally. And then number four, a competitive cost base to position us for the future. Then we have also set out clear ambitions in terms of financial targets, so to be more than 5% growth CAGR 27-28, and then about 16% margin by end of 2028, and we are tracking towards these targets still. So let's see how we are progressing then on these priorities in practice. So let's start off with number one. I would say overall, the execution is continuing across all the four main areas, and importantly, we are making tangible progress. And it starts with the market and other customers. So during Q1, we have been focused on making the organization more customer-oriented and then commercially sharper. And this is visible now in how we are strengthening client governance and sales, and we are already seeing this reflected in increased AI-related demand from customers and the backlog buildup is happening. Also reminding us about the announcement last week, the Microsoft partnership is also quite important for us and will contribute to strengthening our market position going forward. And at the same time, we are simplifying the company to improve focus and scalability. So the divestments we have announced and completed are about freeing up capital and also management at attention and capacity. So while the harmonization of the tech consulting operating model is a key enabler for scaling our business more efficiently going forward, We continue to expand selectively also in Europe from a kind of growth point of view. These are very targeted moves. We see clear opportunities going forward. Iberia is a good example where our acquisition end of last year, beginning of this year, created an entry point. And we are now building on that with two new signings in Q1, Motua Madre Linea and then Forvia. And similarly, we see that Intex moves in the UK and Denmark reflects also expansion in areas where we have attractive opportunities. At the same time, we are actively managing our cost base while we are making good progress on our savings. We have also today announced additional actions in tech consulting to adjust to the current market environment and to ensure competitiveness going forward. So overall, this is about disciplined execution across all levers, strengthening the commercial side, simplifying the structure, and then investing selectively in the different markets and then adjusting the cost base going forward. And then AI is for sure reshaping the tech industry. And understandably, there is a question in the market around disruption. Who benefits and who are at risk? Overview is that the impact is not uniform. In fact, AI tends to benefit vendors that are deeply embedded into customers core operations through local presence and that manage business critical data and operates in regulated environments where security, industry expertise and long term relationships are essential. So in other words, The parts of the market where customer relationships matters, where data is sensitive, our systems are mission critical, those are structurally more resilient to disruption. And this is exactly where T2 is positioned. We have a strong foundation with deep presence in vertical software through high regulatory requirements, a large install base, long-term customer relationships, and our software and services are already embedded in core processes. And again, AI is not something that is new for us. It's already integrated into our products, deliveries, and modernization work. And we continue, of course, to invest in this area. Our position is also supported by what we see in the market. According to our Nordic AI survey, which we completed in February, organizations are now clearly moving from experiments to production with around one third of the participants in the survey already using AI actively. And at the same time, the biggest barriers are security, skills, and governance. areas where customers typically rely on trusted partners. For us, this is not about theory. AI is already embedded across our operations and offerings. We have AI tooling in all of our software units with multiple tools in place. We have also a very advanced AI innovation center in Bangalore that is now going to be replicated to other geos. And we are also using AI in areas such as sales, business development and automation of internal processes. This is also visible in concrete customer and business use cases. So for example, in bank tech, we are already embed the agentic AI into core solutions such as lending, ATM, financial crime prevention. CareTech, we have moved from proof of concepts to production in several solutions in life care, such as Life Care Smart Notes, which is an AI-assisted documentation solution that helps healthcare and social care professionals to create high-quality notes using speech or text. Last week, we took a further concrete step to accelerate this through the strategic partnership with Microsoft. And together we are moving AI from pilots to production at scale and building also capabilities across 5,000 consultants within our tech consulting business. So overall, we absolutely see AI as an opportunity to strengthen overall in the value chain and also increase our relevance in the years ahead. Let me then summarize the key highlights from Q1. Overall, we delivered strong profitability and solid performance within our software businesses. Then, I must also say that I'm not satisfied with the revenue at minus 3%. However, it's also important to note that this includes around 2 percentage points of expected headwinds from legacy runoffs in bank tech and care tech. Adjusting for these effects, the underlying growth in our software businesses remain healthy. At the same time, the weak market environment in tech consulting continues also to impact overall growth. On profitability, we saw a strong improvement with adjusted EBITDA increasing by over 4 percentage points year-over-year to 14.7%. And this is driven by our cost optimization program as well as strong margins in the software businesses. So then, given the continued softness in the tech consulting market, we have also initiated additional cost actions to ensure competitiveness going forward. And as mentioned earlier, our strategic transformation continues, including large-scale AI capability buildup and then strengthening of the key partnerships, like we saw with Orange, like we have seen also with Microsoft, and there's more to come. So overall, while the market environment remains mixed, we are improving profitability, continuing to execute our strategy, and as communicated in connection with Capital Marks Day, we regard 2026 as a year of transition for Tieto. As mentioned, underlying growth in our software businesses was healthy and profitability clearly improved during the quarter. In addition to that, let me highlight a few other points. So first of all, The leverage improved significantly and is now at 1.3x supported by the completion of the Beck Consulting divestment and also reflecting a strong balance sheet position. Secondly, order backlog continued to grow. It's up 8% year over year, providing good visibility going forward, and it's also important to understand that we delivered a very high order intake in Q1 of 2025, and despite that, we are up 8%. And then finally, cash flow from operations was solid. If you compare like for like, we are actually up 9%. The number that you can see to the right includes last year, including tech services and then back consulting. So like for like, up 9%. So I would say that overall, alongside the profitability improvements, we are also strengthening our financial position and maintaining good forward visibility. Let's then have a look at the four different business units, starting off with tech consulting. I would say that the market environment in tech consulting has remained weak. We have recently seen that increased geopolitical uncertainty has continued to delay decisions and the overall demand remains soft. I read this new article this morning from BCG, and I think the kind of geopolitical picture is impacting a lot of different industries. And we can also see that this is reflected in our performance. Growth was somewhat below our internal initial expectations for the quarter. And lower activity levels have also then impacted utilization, which again has impacted the profitability. So based on this, we have taken additional actions to protect profitability. This includes targeted capacity adjustments. in the delivery side, ensuring that we remain competitive while aligning with current demand levels. At the same time, we are ensuring simplification and strong execution going forward. So as part of this, we have also made the leadership change in the business. So Johan Mygaard, who previously led our in-tech business, is taking over the leadership. This is to maintain momentum in execution while we initiate a broader search for a permanent leader. And while the short-term market remains a bit challenging, over long-term transformation continues, including strengthening over AI capabilities and partnerships as discussed earlier. So based on actions initiated, We have good reason to believe that we will improve the relative performance already in Q2 2026. Furthermore, we see that AI is well visible in our agreements during the quarter. So for example, our partnership with Park Holidays is focused on AI enabled enhancement, helping them improve customer facing digital platforms. We have also helped one of our clients offshore qualify with enhanced end-user functionality through AI. So AI is used on the supplier portal for qualification and follow-up of suppliers within the energy and utility sector. So again, overall, we are adapting to the market conditions while continuing to drive the transformation of the tech consulting business. Moving then to bank tech. And here we continue to see good momentum. Profitability was strong during the quarter and underlying growth remains solid. So reported organic growth was impacted by a legacy contract runoff, communicated earlier, which reduced the growth by approximately five percentage points. At the same time, the quarter included a one of positive impact from a customer contract, also resulting in the kind of two-year extension of that specific contract. But adjusting for these items, underlying growth is around 3%, which we see as a solid performance in the quarter. Profitability clearly improved, 17.3%, supported by our cost optimization measures initiated last year, and we are now operating at a strong margin level within Banktech. In addition to this, our order backlog remains strong, providing good long-term visibility, 27-28, based on also signings back in 2025 and now during Q1 of this year. So this is absolutely visible in the backlog and we have concluded also several agreements during the quarter. We entered into a strategic partnership with Danish BEC Financial Technologies. So our modern cash management solution will provide large corporate customers with real-time visibility of the liquidity. We also entered into a multi-year agreement with Sparebank 1 on the development of a new mortgage solution. So this solution is built on modern technology, real-time data that will automate assessments, decisions and process flows, of course enabled by AI and also microservices components as part of this, which makes it a kind of open industry standard solution to be also resellable. So overall, Banktech continues to deliver stable growth, strong profitability and a good forward visibility. Looking at Caretech, we continue to see strong and stable performance. As in Banktech, reported organic growth is impacted by legacy business decline, which is washed out when we come into 2027, but which is also reducing the growth by around 5 percentage points in Q1. Adjusting for this underlying organic growth is around plus 3%, like in Banktech, which we see as a solid level. Profitability, as you can see, 26% margin is a very strong number, also improvement year over year. And during Q1, we also saw strong order intake supporting future growth. Importantly, we continue to develop overall offerings with AI enabled solutions. So for example, AI is already being used across the care pathway from data capture, imaging to clinical decision support and risk prediction, helping them improve both efficiency and quality of care. On agreements, we have made good progress across the Nordic countries. So during the quarter, we signed a significant agreement with the city of Stockholm to deliver life care solutions for municipalities. and welfare services. So the agreement is valid for up to 13 years. Our solutions then offer support in daily operations, enabling efficient workflows across the entire care process from planning, follow-up to documentation and mobile work. In Norway, we deliver a life care workforce planner solution to Nittedal municipality, providing a modern resource management system to support workforce planning across the municipality. So overall, Kertek continues to deliver stable growth, very strong profitability, and I would say a good momentum going forward. Then finally, In Intech, we continue to see solid overall performance. Growth was 2% for the quarter, and it's worth noting that this includes clear negative impact from our pulp paper and fiber segment. Absolutely also part of the geopolitical picture where the customer's activity has slowed due to the current situation. So with them also projects being postponed globally. So this alone is around two percentage points negative effect for impact impacting then the overall growth. Excluding this, the rest of the businesses are performing well with solid growth across most areas. Profitability again improved further and remains at good solid levels, supported by both the momentum of what we did last year in terms of cost efficiency, but also the top line growth, of course. So from a strategic perspective, The highlight in the quarter was the expansion of our multi-channel and VIX offerings into the UK market, which is an important step in scaling the business. At the same time, the order backlog remains healthy, supporting forward visibility. And as mentioned earlier, we have also announced the divestment of Edlevo and HR Payroll businesses, which is expected to be closed in Q2 of this year. So we have also strengthened our position in the Danish public sector. We were selected by Denmark National Bank to deliver an electronic case and documentation management system based on our public 360 solution. Furthermore, Butterfield Bank shows Tito multi-channel to consolidate document distribution. And then this bank is a full service bank and wealth manager operating across Bermuda, Cayman Islands, Guernsey, Jersey, the Bahamas, Switzerland, and Singapore, and the UK. So with our platform, Butterfield will consolidate document distribution across digital and physical channels. Overall, Intec continues to perform well, solid underlying growth and good strategic progress. So, Tommy, that leaves us with the CFO report.

Thank you, Andre, and good morning, everyone. So, Q1 highlights were significant profitability uplift in accordance with our plan and solid performance in our software businesses. Group overall growth was impacted by known legacy contract run-offs and continued weak market demand in tech consulting, as mentioned. Our profitability improvement of 4.1% compared to prior year was driven mainly by our successful cost optimization program, which aims for a significant 50 million cost base reset. Good to note that we continue to compare against prior year with IFRS 5 cost burden, which accounted for 1.8 percentage point of the improvement. Our one-time items for Q1 were positive by 15 million, impacted by gain on sale from BEC divestment of 20 million. Full-year one-time item expectation is unchanged at 1.5% of revenues, excluding the capital gains. Other Q1 highlights would be our strong cash flow and continued solid order backlog with 8% year-on-year improvement. Our 150 million share buyback program, which returns back sales proceeds to our shareholders, is ahead of the original timeline and we expect to finalize that early September. As mentioned, we delivered strong operative cash flow of 85 million in Q1. Our networking capital decrease of 14 million was seasonal. This is resulting primarily from the prepayments received in the beginning of the year. Note that Q1-25, so prior year cash flow, includes contribution from the divested businesses as the cash flows are not restated for prior periods. On comparable basis, our Q1 operating cash flow has improved approximately 9% compared to prior year. We also delivered strong free cash flow of 202 million, which included net cash proceeds of 147 million from the BEC divestment. As discussed already in our Q4 report, our net debt EBITDA improved significantly and was 1.3x at the end of Q1. Main reason for the improvement is the BEC divestment, with divestment proceeds decreasing the net debt and the gain on disposal increasing the EBITDA. During the year when we execute the share buyback program, our leverage will gradually increase. And on fully adjusted basis, our leverage at the end of Q1 is already at targeted level, so slightly below 2x, when we consider the impact of the BEC divestment completion of our share buyback program and the IFRS 5 cost burden impact. Then a few words on our cost optimization program where we have reached 105 million run rate savings by end of Q1 and we are fully on track to deliver the full 130 million run rate savings by end of 2026. As communicated earlier, this program aims for a permanent cost-based reset of approximately 50 million, while mitigating the cost burden from tech services divestment and reducing the overcapacity in the consulting business primarily. Our estimate of the one-time cost from the program are unchanged with 55 to 60 million, of which we have incurred 46 million by end of Q1. On employee matters, LTM attrition remained at low levels, being 7.6% at the end of Q1. This reflects the soft market environment. During the quarter, our net personal reduction was 800 FTEs, of which 430 FTEs relate to M&A activities, namely BEC divestment and Tieto Iberia acquisition. Overall personal reduction year on year amounts to approximately 14%. We expect group salary inflation for the year to be between 3 and 4% compared to 4% in 2025. The lower inflation expectation reflects the overall software market environment. Next, some outlook remarks for Q2 26. On growth, we expect group revenue growth to improve from Q1 levels. Tech consulting will continue to be impacted by weak demand across all markets. We expect growth nevertheless to improve from Q1, but still to remain negative. The improvement is primarily driven by easier comparables. Banktech continues to be impacted by legacy contract runoff impact of 6%, which is an increase of one percentage point from Q1. However, revenue growth is supported by continued underlying growth in the software businesses. CareTech continues also to be impacted by legacy contract run-offs by negative 5 percentage points, which is at the same level as Q1. However, revenues are supported by continued underlying growth in the modern software portfolio. Intech growth continues to be supported by strong order backlog. On profit remarks, cost optimization program contributes to profit improvement across the whole company. Consistent with prior year, our annual salary increases take effect in April. On other remarks, there is only minor impact from the working days. Then as usual, Q2 profitability outlook per business. We expect tech consulting, bank tech and in-tech to be above prior year profitability level and care tech to be at or above prior year. As the year 2026 includes some specific headwinds, we created this table in Q4 to help everyone to navigate the growth dynamics of 2026 on a quarterly basis. The outlook for the year remains unchanged in terms of the growth dynamics, and we continue to believe on neutral growth momentum for tech consulting in Q4. To note, CareTech legacy runoff impact in Q1 was 5% instead of the estimated 6%, which we have adjusted in this table. Remaining of the year is unchanged. In summary, these specific headwinds amount to negative 3 percentage point at group level and are fully accounted for in our guidance, which remains unchanged. Now back to you, Ender.