Vitec Software Group AB (publ)

Welcome to VTech Software Group QTU 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers, session participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Ole Backman and IR Patrick Franson. Please go ahead.

Thank you, and a warm welcome to everyone attending this conference call today. I'm Patrik Fransson, Head of Investor Relations at BTEC Software Group, and with me is our CEO, Olle Wackman. First, we will give a short overview of BTEC Group, and then follow by comments on our report we reached earlier this morning. After the presentation, we will, as always, open up for questions. So, Olle, with that, I'll hand over to you.

Thank you, Patrik, and a warm welcome as well from my side. So we'll just jump ahead, as Patrick said, into the report. And this is us, Olle and Patrick, your hosts for the day. And just taking the VTEC in brief picture, as we always do. So 27,500 business-to-business customers, we're serving that at the moment. We do that through the 49 business units or companies that we have. FIT Underground sales in 13 countries, but all in all we have sales in over 60 countries by now. Proforma sales, roughly 3.7 billion Swedish, 85% of that is recurring revenue, which is an important part of our business model. And to my aid I have the benefit of having 1,870 colleagues by now. And you can see the sales distribution there on the right, and we're going to get back to that. And talking about sales distribution, we have a really broad exposure, but what we like to say, a very limited dependency. So you can see the largest customer, the business units of the total, it's just 8%. And of course, 10 largest customers only account for 7% of the total sales. So that gives us a great risk distribution in that sense. And also on the geographical markets, you can see down there, they're quite evenly distributed, 25% in Sweden, 24% in Finland, 14% in the Netherlands, and so forth. So good distribution, and this is also something we that we normally look for and really appreciate in the M&A investigations that we do is to search for companies that have a similar good risk distribution. Talking about growth, how we do that, we call that the responsible growth path. So what we look for when we acquire companies is of course that they are vertical software companies, that they are established and profitable to start with, that they own their own software, the IP rights, so they have a proprietary software, and they have a business model based on recurring revenue. And then if they are successful, we continue to really nourish that business model, making them market leaders if they are not already market leaders when they come into the group. And then we further develop that through the decentralized organization. We look very closely and monitor product investments. And, of course, we don't just invest for the fun of it. We invest in future growth, in the organic growth. And going forward then, being a perpetual owner, we continuously develop our companies in order to make these small but nice incremental steps all the time to continue on the growth path. And talking about acquisitions, this is the four latest ones. So two for last year and two earlier on this year. We did not conclude any acquisition during Q2, but we finished 2 really nice one in Q1, Dutch Autonet and Swedish Infometric. And you can see on the bars there that in total that these two have a combined sales of roughly 190 million Swedish kronor added to the group. And when we look at the different verticals that we serve, we have a great variety of those, roughly 22 different verticals. You can see the top five ones there in percentage, property management being the biggest one with 18%, followed by the auto industry for 15%, and then healthcare and then welfare sector of 11%, and then we have energy and utilities of 8%, bank finance roughly 9%, and then it goes on. And in these bubbles we can have sometimes just one business unit or we can have multiple business units in multiple countries as well. And talking about the business units, this is a chart that we have shown you a lot of times before. So there's basically no news here apart from the fact that, of course, it has also been amended for Enova and Bid Theater. on the new way of accounting for their revenue according to the agent's principles. So Enova is in this bar here roughly 100 million, and it used to be roughly 300 million. And Big Peter is roughly 36 million, and it used to be roughly 150 million earlier on. You can read more about that in the report. One big benefit of being part of a purely software-focused group is the shared knowledge, which really contributes to the success and just keeps on getting better and better with size. And here we gather forums internally where we share knowledge, we share successes, we share failures. I mean, it's also a great catalyst for spreading good or best practice or good practice. across the group and especially of course with AI coming in here at a great speed we can really have these good examples so what has been used what works what did not work what were the experiences how did the customers react how did the internal organization react and so forth so we have lots of these different forums usually Two, three times a year just over teams and sometimes they meet up physically as well just to further share the knowledge and making it easier to reach out across the business unit. So a great benefit across the group here. And then talking about AI, I mentioned some on the report here. Of course, there are lots of things going on at the moment and At this time of year, we have just concluded the strategy sessions for each of the business units. We do that throughout May and June, and it has been super encouraging to really learn and see what's in the pipeline, what they have already done, how far they have come, or are some of them on the more early stages, but everyone is doing It could be both internally and in the customer applications as well. And we firmly believe that it is a deep learning here and goes faster and faster. And the value proposition are broadening the scope, what we deliver to the customers, things that previously might have been out of scope or too expensive or taken too much time. That is now more feasible for us, so we can really improve the scope and in parallel, of course, our internal efficiency in doing so. And we firmly believe that the combination here of, of course, domain knowledge, proprietary data, and the skill set and the deep Corporation that we have with our customers really underpins this market position that we have and the competitive advantages that goes with that. Now we have a few examples here if you take a very broad ERP-like system which we have in Hitek Fastighet in the PropTech sector here in Sweden. Already two years back they have been really focused on AI, what that can do for us, starting off internally and then also widening that to the customer. so nowadays we have quite a few agentic ready it's more of an ecosystem so it's really going from a system of records to an ecosystem with a system of records in that sense so we have language support we have We have AI assistance in customer support, both at our customer side and also our own customer support, of course, internally really enhancing that. Then go for Finis Actite, which is in the healthcare sector, and it's really all about continued automation of the clinical documentation within the health sector, and of course here really combined with compliance and security. It's also very sort of business critical, system critical for our customers that this works. And then we really are on the brink of releasing a brand new version. And that version has really been sort of fast forwarded a lot, given the AI applications that we have done. So that's more internally still. And then Vita Kennedy, which is a very sort of domain-specific and very pointy products for automating better forecasts. And both the quality of the forecast, but also the way that we can harness more and more different forecasting models, drawing out the best conclusions from that and delivering it for customers with the benefit and help of AI. So that was a few examples of what we're doing in that field. Then moving over to the numbers. So the highlights for the quarter, I really think that of course the continued growth in sales and a 15% in total, roughly 4% of that, just over 4% organically and 11% growth in the subscriptions, 20% growth in the transactional software revenues and this is after we have recalculated everything according to the identical method and it proves that there are multiple of business units that have these revenue streams and it is kind of a sign that it is a good momentum in the economy in the fields that they are operating in and especially here we can mention the real estate agents that have quite a big portion of, and always have, as long as we have owned them for over 15 years now, part of that revenue is transaction driven. And there's a good momentum in that market. So there's a vast amount of business units that are all contributing to that 21% growth in transaction revenues. And of course the cash EBIT which is our internal metric very close to the cash flow. 18% growth and one percentage point up on the margin from 24 to 25. It's really encouraging to see. And talking about cash flow, all according to plan really. This is highly what is expected. As you will remember, we have basically all the year's cash flow in Q1, which is a fantastic model, and we're super happy with that. And then the rest of the three quarters are fairly sort of even as a total. So it's really perfectly in line with expectations and slightly better than last year. If you continue to see the growth, this is growth in total sales. You can see the bars there by quarter or by year and also rolling 12 months there. And if you take the 10-year average growth there, it is 19%, which is, of course, super strong. And this year, so far, we are at 15% after six months. More important is, of course, the growth in profits here. This is the EBITDA result. You can see the increase in both the margin in absolute terms and also margin-wise for the quarter. And the growth here over the 10-year period has been 24%. And then CashEbit, our internal metric here. As I mentioned on the quarter here, one percentage up on margin from 24 to 25 and increase also in absolute terms, of course, actually making it one of our absolutely best quarters in terms of CashEbit's performance. And the organic growth, important I can mention, we divide that by subscription, which is the maintenance revenues, the SaaS fees, the hosting fees, that grew 4.4 actually in the quarter. So just under the mark there, 4.4. Also in line with expectations, we are seeing less of a tailwind from price increases than last year, just due to the fact that they are usually CPI linked, and that has roughly gone through by now. And then you can see there the 21% growth in transactional revenues. And to sum things up, it's been a fairly sort of okay The strong quarter, I would say. We're happy with the results all the way through. And it's really very much according to plan, I should say. And like I mentioned in my text on the CEO comments for the report, we are seeing some sort of life in the tunnel in some of our business units. There is more activity today. You can, when you contact the customer, We've got a meeting in a week or two rather than, okay, don't call me. I will call you in three months' time. So these kind of effects, we haven't yet seen it in the revenues, but we're for sure building up order book and the momentum for the next few quarters ahead. So we're The courses are optimistic on that side, and the same goes for the M&A environment. More things to look at, more dialogue on the way. We haven't lost anything. as usual we use the same criteria we are very sort of consequent and around the valuation multiples what we think a nice VMS company should be valued at and hopefully we will be able to deliver something on the M&A as well but always using the same characteristics and the If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

The next question comes from Predrag Savinovic from DNB Carnegie. Please go ahead.

Hi, good morning, and thanks for taking my questions. We can start by discussing the Outlook commentary a bit more in depth, where you state you see improving business climates. Could you discuss in which areas overall are you agreeing to the comment that it sounds like the demand? is increasing and ideally if you could potentially translate this into organic growth numbers maybe even.

Yeah, I can sort of elaborate a bit on the way we see that. We have seen that across, like I said, the healthcare sector and the sort of public sector. And that has been an increased demand in that space. That is, of course, always not So, dependent directly on the general economy, but nevertheless, they are picking up. In that sense, we also have seen it in the sort of prop tech or real estate sector as two good examples here. And then, of course, also in the real estate agent sector. All these three have been really sort of picking up, like I said. We haven't yet seen it in the actual revenues. Like I said, it's more the fact that earlier on this year and all throughout last year it was more like, yeah, it's interesting, we can discuss it, but we can do that in the next three months or six months or something. Now you get into the meetings, you get into the dialogue, and also in some cases we've actually been able to sign a few orders as well. That's really encouraging. But as I said also, it's not across all of the business units, but certainly in those three areas, it is picking up and that's really encouraging to see.

Very good. So basically, there could be some

lag before we see this in the reported organic numbers but perhaps towards the year you can see you know even further improved growth rates due to this better climate as you know yeah for sure there is a lag here I mean if we're assigning orders today there is an implementation and then that's the beauty of I mean we are delivering mission critical quite complex system it shouldn't be easy either to just So it's sort of built into the business here. So there is for sure a lag, but it is encouraging nevertheless that we are in dialogue. We have signed more orders now than the earlier parts of the year and all through the last years.

Okay, very good. And then in terms of the improved organic growth on the transaction revenue side, I mean previously it was more tilted to Innova, but now within your reporting it's more balanced. Could you elaborate on the growth in the overall transaction space, which areas you see driving that?

Yeah, it's actually a lot of the same areas that I discussed that we have seen. So we usually see an activity in our existing customers, for instance, in the real estate agent sector that has quite a large portion, which is driven by transaction. And especially in Norway, where we have had tremendous success and there's a really good momentum in the real estate market. I think they grew their transaction base over 30% quarter over quarter. So that's one. And then it's more of the fact that we have had this kind of revenue all year, but it has just been muted a bit by Innova and built after being so large. But at the same time, Innova is Actually quite flat. Comparison numbers a bit better on the quarter. Q1 was a bit lower, Q2 was a bit better. They are growing really healthy and good. So there's more advertising spend in our customers, which then drives that revenue.

And then finally for me on the proforma organic growth and the returns are around 7%. How sustainable is this growth in your opinion? And can this growth be more representative of, say, for the end of this year and next year, given what you also see in the overall market trends improving?

The proforma, that is, of course, I mean, 6 months of this year and 6 months of last year so the pricing component will go down a bit in that as well because now we are at roughly 1-1.5% lower in terms of pricing tailwind and that sort of leaves it at the number of roughly 5-6% where we have seen over the years that that has been a fairly sort of normal number for us The next question comes from Thomas Nielsen from Nordia. Please go ahead Thank you for taking my question

Perhaps we could discuss what you're seeing at the forefront of AI developments. Are you seeing any form of new competitors emerging in your niche markets and are you seeing any changes in customer churn caused by new entrants in your niche markets?

I haven't really seen any customer churn just on the basis of AI yet. Yes, we have a churn, as everyone else, but not deliberately on the fact that a specific new entrance just because of AI, no. But of course, we have more and more start-ups coming in in certain sectors and I would say in banks, finance and real estate they are for sure very active but they are usually very niched so if you are the ERP provider if you are the system of records in that sense we are not seeing but we are seeing more on the peripherals on the on the other side, that's also where we are experiencing most of our own AI development at the moment that we can offer to our customers. We are seeing the demands. We are talking to the customers. And of course, we are also seeing what the competitors are doing. Because that is just an easier and faster step. You don't rewrite an entire ERP system that easily and for sure you don't exchange it. That is a bit what I said earlier on. It is sort of built into it that these are very slow moving things. And they should be. That's why they are mission critical.

Okay, okay. And a final question for me in terms of AI monetization. Do you have any concrete examples of AI features that you found customers being willing to pay for? And when do you think at VTech that AI could make a measurable contribution to organic growth?

I think by going forward, basically everything that we develop now is The way we have grown is through more and more modules more functionality and that will for sure be driven by AI or if it's not produced by AI, which everything is today, it will be an AI application in itself. So that will just be a natural step of what we do. That's just, you know, super natural for us in that sense. And, yeah, in some cases, of course, if you come with new functionalities, customers are willing to pay for it. But if you just exchange a current module that is doing one thing with a more efficient one that is doing something that has previously been really hard to charge for. But in this case, if you can prove to your customer that by using this, for instance, some agentic function, their processes becomes more easy. They can save money on it. Then you have a possibility to have a dialogue around, okay, what is the customer value and what part of that should we be rewarded for?

Okay, thank you very much. The next question comes from Daniel Thorsen from ABG Sundal Collier. Please go ahead.

Yes, thank you very much. First one on M&A. You mentioned increased activity but also no acquisitions in Q2. Are sellers more keen to meet at lower multiples as seen in public markets or is there anything else behind the increased activity you mentioned?

What we've seen so far is just the volume, really. Quite interestingly, there is volume of, you know, a bit bigger targets by our standards, I should say. Some of the larger targets and also a lot of smaller add-ons. And still that mid-layer, what we call usual size, 40, 50, 60 million company sizes, they are more They are still absent and far and few in between because they are usually founder led still and they are a bit cautious you know waiting okay how will this pan out and they are usually not in a hurry either it's like the bigger targets are usually have some sort of institutional or private equity co-ownership or and of course they need to turn around their assets every now and then so I think that is a lot of what they've seen and really hard to say we are really not driving the prices upwards anyway so we are still losing more than we're winning because we really firmly believe that We will put a fair value on this asset. And if someone is willing to pay some crazy multiples, that's up to them. I can't justify that. So hopefully, we will be able to meet up. And like I said, we've done two really nice acquisitions so far this year. And we did two just the entire last year. And we still have six months to go. And for sure, we are in a lot of dialogues. You know, we're not going to go crazy and still be very disciplined around the multiples.

Okay, that's helpful. And also, do you see any regional differences in terms of M&A activity? And also, are you looking outside your current markets to find new targets?

Well, actually, the hunting ground is Europe. So yeah, we are for sure looking outside our current markets. Yes Naturally, we are less well known outside where we already are and Europe is a big place. So here in the Nordics, we are pretty well known and I should say we probably get to look at not everything but most of the things that are active here But it is for sure a lot around the more continental Europe.

Okay, interesting. Final question here, more technical. You have had a tax rate of 26% both in Q1 and Q2, higher than I had both quarters and also higher than historically. Is there anything making this structurally higher also going forward that is good to have in mind?

Not really. It's more or less the fact that we are tilting more and more of the profits outside of Sweden. And in Sweden we have fairly low corporate tax rates both in the Netherlands, Belgium, Poland and so forth. It is higher tax rates for companies. So it's just an adoption to the fact where we are earning the money.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad.

The next question comes from Fredrik Nielsen from Redeye. Please go ahead.

Thank you. Hi, Olle and Patrik. I wonder regarding your customers. Last quarter you mentioned that many customers are still quite cautious regarding AI and new features, yet you seem to invest. quite a bit on those. Have you seen any change in how customers view AI and your new features over the last few months?

Yeah, for sure. I mean, it is, of course, on everyone's agenda and also our customers. The fact that these industries are quite conservative, but I think that both the customers have sort of come to the point to take They really need to address this. And then you usually go to your existing vendor and say, okay, what are your thoughts? How are you thinking? What is in your product pipeline? And so forth. So yeah, for sure, we are in more active dialogues and they want to hear what we are doing. But at the same time, I think I said that last time as well, they want to know that they will benefit from Whatever comes out, but they are still, you know, they don't want to make a total change or anything. So it's in their processes. So it's a bit of both. They're really interested and keen on learning more, what we can help them with, and usually taking the small pieces, not doing everything at once. So that's still the picture. But yeah, for sure. More interests, more openness and willingness to try as well. They usually do pilots and things like that. So we have lots of that ongoing at the moment.

Okay, I see. Regarding the improvement in order book and momentum in general, as you mentioned, you have a high market share in most of your segments. I mean could you elaborate a bit what kind of things are the customers looking for or is it that you have managed to find new customers or how should we interpret that?

I would say as an overall comment on that it is our existing customers that we're working on because you know we have that deep domain knowledge with us so we understand the processes that they want to become more efficient on And then we try to embed that into our product pipeline and into our functionalities. So it's really more and more about, you know, making our customers more efficient. And I think for instance in the healthcare sector, which I mentioned earlier, it's all about automating the processes around the clinical documentation. And of course, that is the core workflow of the customer. But at the same time, there's a lot of regulations. There's a lot of security embedded into it. So you don't just switch something to a new feature directly. So it really needs to be tested. It needs to be validated. And then it needs to be implemented in vast organizations that are perhaps not too keen on changing all of the time. So there is a lag. Everything doesn't move as quickly as you might think. But for sure, it is just going in one direction. Great.

That's all for me. Thank you very much.

Thanks. The next question comes from Patrick Schwartz from Pareto Securities. Please go ahead.

Hello. Just a few questions from my side. First, here on the organic subscription growth, there was a slight step down here compared to last quarter. And I think you mentioned here 1%, 1.5% lower price tailwinds. But can you just go over the bridge here compared to last quarter and exactly how much right now is price compared to volume on the subscription side?

When we have churn, we usually have that in the first quarter. And then we have the price increases going through also in the first quarter, usually. So we haven't really signed any new logos or any increased, like I mentioned, in both the Q1 report and the increased market activity that we've seen now that hasn't sort of filtered through in the books so it's more very steady state half of this it's roughly 4.4% to be precise in the organic growth for the quarter on the subscription part here two, two and a half would be price and the rest would be new sales and so it's really nothing out of the ordinary that we think. There's no one single thing. It's more of, okay, it's been really slow. We haven't added anything really new, and then the pricing is there.

Okay, that's fair. And then on the cost side, organically, Of course last year you didn't add any new employees, Matt, if they're just for acquisitions. Is that a fair assumption for the rest of the year? And also how are the salary raises expected to be this year?

Yeah, salary raises have been concluded now in the last months in Q2. And overall I think we landed on average now across the different countries on like 3.5, and roughly so and personnel being by far the biggest cost that we have and the rest is more premises and they usually follow indexes and they would be like one and a half two percent something like that so I think we have a good cost control, and also just the fact that all the business units are really careful in recruiting. I think overall, I think we were like 10 or 12 more employees than we were organically, which is 0.7% compared to 1,900 employees, really. So it's very low organically. And at the same time, those who are supposed to grow according to the strategy plans, we have a lot of companies that are really accelerating now. And of course, they should hire more people. And then we will see going forward, I don't really expect it to go down, but I think that we will probably be here around the net zero on Gs.

So with the, as you mentioned, Chris, with the increased demand that you saw here in the second quarter, you kind of expect to be able to meet that demand towards the end of the year with fairly flourished employee development, I assume, and fairly flourished cost development?

Yeah, that's the expectation, because the sales efforts have been done, and then the rollout, like I mentioned, we can't do that. It doesn't really accelerate that fast, because These are mission-critical complex systems, as I mentioned, and they do take time to implement. So, for sure, we are expecting to be able to cope with this level. Should things really boom and become super good, we don't see that at the moment, but if it continues like this, and then the slight increase, we can for sure handle it with the organization that we have today.

Okay, and then just a final question. You more or less already answered this to some degree earlier, but on the transaction side, of course, even with the new accounting standards, NOVA's bill is fairly strong in the second quarter and the third quarter. So organically, transactions were up 15%. How much was underlying, if you remove that, if you remove NOVA from that figure?

It will roughly be there around the 15-20% anyway, because Innova was actually quite flat, a bit increasing in Q2, but in the first six months it was kind of flat. It was basically all of the others that contributed to that.

But is it also then some easier comparatives? Yeah, of course, it was very weak.

For sure, it is a sign of an increased sort of pace in the economy and an increased sort of activity in the customer side because that is what is driving the transactional-based volume. That's one thing. The other is, of course, as well, if you have sold your ERP system to a customer and you want to Well, when you want to become a more important and integrated vendor, we then start selling more and more modules. And some of those modules are transactional-based. So it's also an effect of the fact that we continue to grow with our customers. If you've already sold an ERP system, you're not going to sell another one to the same customer, but you can sell more modules. And some of those modules will have a transactional fee.

Thank you. That was all for me.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Well, thank you for interesting questions and great interest in the VTEC report. And by this, we conclude this conference call, and I wish you all a pleasant summer. Thank you.