Vitec Software Group AB (publ)

Thank you and a warm welcome to everyone on this call where we will cover the report that we reported early this morning. I'm Patrik Fransson, Head of Investor Relations and with me is our CEO Olle Backman. As always we will start with a brief overview of Vitek as a whole and then followed by an update of the Q2 and H1. And after that we will open up the we will open up for questions. So with that, I hand over to Jule.

Hey, thanks, Patrik. And welcome to the presentation. Sorry for the delay in the beginning there. But as Patrik said, we always start with a brief overview of the group and always with the customer perspective here. So we have our close to twenty five thousand customers that we're serving. We will go into the 40 business units that we have. We're still in 11 countries, so no change there. And these 11 countries are made up of our five home markets, which is the four Nordic countries and the Netherlands. And the rest of the countries are connected to one or two of the companies within those home markets. Proforma sales are by the last of June up to nearly 3.2 billion Swedish. 86% recurring revenue is something that we're very proud of. And to my aid, I have nearly 1,550 colleagues by now. Strategy chain as well here, no changes. And you can read this from left to right or right to left, depending on where you want to start. But if we start with the values, of course, products, keep it simple and trust and transparency. Over to brand promise, which is a very important part of what we do, which is to be a reliable both supplier, of course, but also a reliable employer. So we invest in products and we invest in people today in order to be relevant for tomorrow. Business concept, of course, being a providing standardized business critical softwares. And the objective is still to be a profitable growth company. And if we do all these things right, we will help in striving towards our vision, which is to shape a wiser and more sustainable future. And then talking about growth, growth can come from different parts. And if we start with the business units, which is always at the center and the core of our operations, we have the decentralized organization. They have all the resources they need and we support them from the group perspective. So they grow the organic growth there from the business units, of course, then fueled by the common business model, a high degree of recurring revenue with mission critical software and usually they are also market leaders in their niches. And then on top of that of course we add acquisitions and basically the criteria that we are looking for is to find small v-techs all over so we buy ourselves over and over again. So we look at verticality, established and profitable You own your own IP, the proprietary software, and also, of course, a high degree of recurring revenue as characteristics. And then just a few words on the acquisitions year to date, so we have made three so far this year, two within the reporting period, that's LDC in the Netherlands and the bid theater in Sweden in January and June, actually, and then just earlier Earlier this week, actually, Taxiteknik, also a Swedish company. So we will add that in the Q3 numbers. So we're up to three for the full year so far. And just looking at last year, the six acquisitions, and you can see also the distribution there. We had two Dutch, two Finnish, two Swedish, and with a variety of smaller bolt-ons and larger acquisitions like Innova. And looking at verticals, this is another way of displaying it. You can see the bubbles here are basically the size of the vertical. We have some 20 plus verticals that these 40 business units are spread across. And you can see the biggest ones are by now property management, energy, but they're quite evenly distributed as well here. And this is a great way of showing the the low risk or the risk distribution within Vitek. So we have 40 business units, we have loads of markets, and we have 40 verticals nearly. The latest acquisitions, of course, LDC, that's a small part here in labor mobility, and bid theater, it's a part of the media bubble there. This is another way of showing business units that you are used to. Just a few comments here. Even though we have made three acquisitions, we are actually at fewer business units year to date than we are when we started. But that is due to the fact that we have done some mergers across. When we see that it's a good idea on both from a product and development perspective, but also on the customer perspective and how we can approach the market. So NICE and VIMS, two Norwegian business units that were part are now what we call Vitek Forsikring, Norwegian, so their insurance market in Norway and Denmark. And then DL Systems, which was a smaller bolt-on, which has been merged into Aktor Smartbook. And this is also the way we look at the M&A landscape, so the distribution of the sizes of companies out there when we look for them. They basically match our own portfolio pretty well. Organization, same here. No immediate changes. We have the business units, which are at the core here, the 41s. And they are helped by the VPOs, which is our way of dealing with the day-to-day business and supporting them in their growth. And then of course, we have some common group functions also appear to support them. You may have seen the press release that we recruited a new CFO, Mr. Peter Lidström. He will start in the first of September. And then Sara Nilsson, our current CFO, she will stay on and be assuming a role of head of group reporting and controlling. And I'm very happy that Sara will continue with us. She's done a great job, but also looking forward to welcoming Peter on the team. And talking about teams, sharing knowledge is a very important part of the value of being part of the VTEC group for a smaller company. We have a lot of sharing forums where we have common culture concepts for sharing best practices. We have different vertical clusters where business units that are addressing the same market can talk and exchange ideas. This is really a very good way of fostering and cross-fertilizing ideas and experiences across the group. So very happy to have the opportunity for new business units to tap into the knowledge base of nearly 40 other peers. Then moving over to the numbers. The second quarter, net sales was up to 880 million, an increase of 22. Percent recurring revenue, which is what we really strive to increase, was up 27. We'll get back to a bit on the distribution there with, of course, Innova coming in really strong in that quarter, adding a lot of that growth. EBIT margin increased by 17 percent and then the margin is at 30 compared to 31 last year. It's also a bit due to the mix of the income for the quarter. And if we look at the first half year, because we have a long-term interest in everything we do. So we think that the longer the time period, the better it is to evaluate how we're doing. So for the first half year, sales is up 20%, EBIT margin, EBITDA margin up 18, and then the operating profit is up some 22%. And here also the cash flow is really strong on the first half of the year, up 37 percent to 783 million. Because, as you know, a lot of our cash flow comes in the first quarter and then because of the prepayment model that we have and really like. Net sales more compared to by quarter or over the years. We have a compounded growth over the last 10 years of 22%. So basically we're keeping up the pace. The EBITDA margin also a bit flattish this quarter, but I will get back a bit on that. But the healthy level of 30%. And we can move over to this page here. We can see the allocation or the distribution between the recurring revenue. And as you know, we have two types of recurring revenue. We have the traditional subscription based, which is the light blue there at the base, which is the source fees, the maintenance fees, the hosting fees. And that is growing at a really nice pace. And it's a very stable Then we have transaction-based revenues, which is basically value-adding services towards our customers, such as text messaging. It could be maps. It could be kickbacks on payments or spare parts or things like that that we have had all along. As you know, when we added Innova in last year, that really increased a lot because they have a fantastic value add to their customers in the way that we can take the excess capacity of the energy that they are having and make bids on the balancing market in the Netherlands. And that, as you see in this quarter, that really took off a huge margin. and fueled that increase. Basically, all of the increase apart, the rest is growing along with the organic growth, I should say, so it's still growing the other part as well. But Enova really had a fantastic quarter here. It's also a bit on the seasonality. In the summertime, there's a lot more renewable energy sources into the energy mix and more renewable resources. demands more balancing power and balancing power. That's what we sell for our customers. So our customers had a great quarter because this is a revenue share model we share with them. There's always some part of it that goes back to us, which we are very happy for, of course, but it is a bit lower margin than the traditional subscription kind of revenue, of course, because those are really high margins when you have your own So that's also an explanation on the fact that the margin for the quarter was basically one percentage lower than last year because this high volume has a bit lower gross margin component to it. But nevertheless, it is good money for our customers. It's good money for us and at the very low risk to that. Organic growth is also something that we're really proud of and that we see and we're keeping up the pace. You can see the FX part there is going down a bit, roughly 2% on the quarter. But we're keeping up near 10% organic growth in the subscription-based revenues, which we're really, really proud of. and this chart tells basically the same thing so all in all our total sales is the growth of nine percent you take away two percent FX so that's seven percent but that's a mix of all the different revenue streams but you can see up there twelve percent growth in the subscription based recurring revenue take out two percent of FX so that's a ten percent organic growth and that's a number that we're really happy and satisfied with. Diversification of sales, we mentioned that across the different markets, it's quite evenly dispersed. And we also have a great breakdown of the revenue in terms of customers. Great customer distribution, the other 10 largest one is just 7%. And the other 25,000 nearly covers the rest. And this is a bit of a sum up of the quarter. Steady customer development, strong continued additional sales. Like we mentioned earlier, new sales is still a bit hard, but we really have a good upsell and additional sales to the existing customers. We're still not seeing a lot of churn or anything like that. So pretty well. And then we added another three acquisitions year to date. So with that said, we're opening up for questions.

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