Admicom Oyj (ADMCM) Earnings Call Transcript

Welcome, everyone, to Admicom's Q2 2026 Results Webcast. My name is Simo Leisti. I'm the CEO of Admicom, and I'm here with our CFO, Satu Helamo. So let's first jump into Q2 highlights and also in the agenda we have today, some few words about our AI vision and our road map moving forward this year. Also, we are touching upon a few topics around our strategy acceleration that we have boosted now with our change negotiation that ended in Q2, and then Satu will cover the '26 Q2 financial highlights in the end. And as usual, you have the opportunity to post questions online. And also, we have here analysts in the studio. So please feel free to put in some questions in the chat. Let's start with the Q2 highlights. So first of all, like we reported, we see a little bit of mixed messages from the market. We see that even though overall market volumes have been on a slight positive uptick, we see that the positive trend is not equally distributed across all the different segments in the construction industry. We see that there are certain boost from the large data center projects and some infrastructure and industrial construction has been seeing some positive improvements, but especially the new building side in the residential construction sector has been still in a very, very steep decline or not in decline, but in a recession. And we are, of course, very carefully monitoring the progress in the market, and we are aiming to tap into those positive opportunities. And we have seen more than ever our, for example, cost estimation tools being used also in the data center projects, which are very nontypical use cases for us, but we have been happy to support our customers with those as well. And in our comparable figures, of course, now in Q2, normally, we have had the highest quarter with the adjustment fees. And Satu will cover now the comparable figures in our growth also with the adjustment fees taking into consideration. And we reported 4.1% growth in our ARR, which was slightly below our own expectations, and it was driven down by quite a significant number of insolvency and bankruptcy-related churn. And also, we reported already earlier in the quarter that the first 2 months of the year have been really challenging for us in terms of our revenue generation for the year. And we did give a profit warning regarding our growth expectations for this year, and Satu will also cover that in her part. Despite the tough market, we have had a fairly good trend in our sales performance during the Q2. We did report the Q1 as a disappointment in our sales numbers, but Q2 overall was more encouraging. So we -- in every month of the quarter, we were able to deliver better sales results than the previous year. And in comparison to previous year Q2, we grew our sales bookings by 17%. And compared to the Q1, we grew 20% our sales bookings. So in a way, encouraging numbers from the sales performance in Q2. And in profitability, we reported very close to our own expectations, profitability levels. And if we take out some of the adjustment fee related changes in our revenues, we did perform quite well in our operational profitability, and we were quite pleased with the result there. And also, we have seen a good progress continuing in our product penetration. We now have approximately 1/5 of our customers using more than one product of Admicom portfolio. And all the new deals that we see coming in are typically multiproduct deals and also the service attachment has been quite satisfactory during the Q2 as well. And during the second year half, we will be boosting our product penetration with some renewed product packaging and also with the AI road map acceleration that I will be covering shortly. In the AI vision and road map, we have been asking a lot of questions from our customers, where do they see problems worth solving also with the AI capabilities and all of our R&D has been really now doubling down on their AI competencies and the focus for AI-driven use cases and helping customers to accelerate and automate their workflows. So a few words about that in a minute. When it comes to the whole first year half, we have been very, I would say, very shareholder-minded in our distribution of our capital, and we also completed the second tranche of our share buyback of EUR 1.5 million during second quarter. And also, we have done the share cancellation for all of those shares that we have bought back from the market, of course, adding value to the existing shareholders. And like mentioned, we did complete the change negotiation that we initiated actually during the first quarter result and earnings call times. It's now complete. We have had 38 Admicom colleagues leaving the company altogether. And then altogether, approximately 60 roles will be affected by the change negotiation results. And Satu will cover some of the financial aspects to that as well. We are on a mission to help our customers to build better, and we do that together with our customers, with the broader ecosystem of partners. We have also launched some new partnerships during Q2. For example, we are collaborating now more with Talenom. They are taking Ultima as one of their supported construction ERPs for their construction customers. And also, we are further bringing third-party services to our portfolio to help our customers to make their business run better and also to create more value from those services as well. And our vision is to become a partner of choice in the European construction software ecosystem. And we have been exploring the market quite actively, both in terms of potential partnerships, but also in terms of looking for potential acquisition targets as we have been discussing in our strategy. But to be able to complete our mission and to deliver on the mission, we launched a very interesting survey, actually 2 surveys to the market. We wanted to explore why during these tough market times in construction, some companies are doing better than the others. So we conducted a more like a qualitative in-depth survey with CEOs of these successful companies who have been growing faster than the market and who have been delivering exceptional profitability figures. And also, we conducted a quantitative survey that the results will be also coming out in August. And what we found out was very interesting correlations between the different capabilities of those companies and different kinds of actions and behaviors of those companies and the correlation to, for example, a top performance in growth and profitability. We saw that during the tough times, new customer acquisition and being very professional in the bid pricing and bid -- and proposal work is definitely a great correlator to growth and profitability. And also, we saw that digital capabilities and also driving the automation and using technology to improve their operations was definitely positively correlating to growth and profitability. And we got a lot of great quotes from the customers that we can now share with everyone in the construction industry as some of the best practices and as some of the findings from the survey. So we're going to have a big launch event for the survey results in collaboration with KIRAHub, who are the construction and property technology innovation hub that we have partnered with for this survey in their premises on 31st of August. So do sign up to that event and come and listen in why some of the companies in construction industry are doing better than the others and what can we learn from that. So really a great testimony of how to build better, and we have now collaborated with KIRAHub to do that together as a survey. But let's have a few words about the AI vision and the road map, what's happening next in our portfolio development as we move forward. So first of all, our AI vision is to help our customers to build better also in terms of their business productivity efficiency, but also to drive higher margins for their business. And really learnings from that survey that we have now conducted, we will put into use also when looking into our AI development and AI road map. And we want to make it easy for the customers to utilize AI capabilities. So we want to have AI as part of all different products and capabilities, what Admicom portfolio contains. So we want the customers to have full access to AI woven through the whole platform and the workflows that they're using with our products. And we want to make it safe for our customers so that the customer stays in control so that there's always a human in the loop when we deliver the workflows and the automation through AI capabilities. And we want to make sure that all the actions that the technology is doing for the business and for the customers, they are safe and they can be also audited when it comes to audit trails and action logs from those transactions. So we want to make it be valuable for the business, be easy to use and to be safe to use for all parts of the business. And in our road map, we have very clear steps with the progress of AI capabilities. Today, we already have an assistant available for our customers that is purpose-built for helping construction sites to operate more effectively. As a next step, we are now well on the way to connect all of our products to be able to utilize the assistant technology to help to kind of like use the technology in a new way, use it as an extended user interface for the technology and to be able to innovate around the different workflows with the data that is in the products of Admicom. So we want all the products to be able to connect to the AI technology and the assistant to drive value for the customers. Then after that, still in Q3, we are planning on bringing first automated workflows with the agent technologies, for example, for schedules, actions -- automated actions for weekly reports and financial updates from the customers' data so that the agents will start to work in the benefit of the customer in a more automated way. Then in Q4, we will do more work in embedding the AI technology as part of the user interfaces of our products. So not as a separate tool or system, the assistant that you need to log into and you need to kind of like use as a separate tool, but so that it's integrated into the product so that it can have the context of what you're actually doing in the product that you can ask questions or you can drive actions for that specific page on the product or with specific data that you're using in the product. So embedding the AI capabilities to the products. And then as our vision is to create a more comprehensive Agentic platform that the customers can use, they can monitor -- they can modify the different agents to work on their behalf, they can deploy the different kinds of agents, and they can also start to build some agents of their own also in the system. And this is kind of like the example agent catalog that we're building. Some of them are already somewhat available in the assistant like the site diary summarizer so you can start to automatically generate and also work on the site diary inserts and data points for that. But you can also start to do different kinds of document and plan comparisons. You can start to support the bid management process like we saw in the early sneak peek results of the survey that we have conducted that the sales and the bid management is one of the key drivers for growth and profitability for construction companies. So we will be putting a lot of focus in how we can help the customers to be more automated and effective in building their tenders against the customer requirements, as an example. So more agents will be coming out during this year, and we will then start deploying the agent platform as we move forward. So a lot of development in the AI area, and we have had a lot of work around that in our R&D department. And this is the picture that we have been showing before regarding our portfolio. So this is exactly in line with our vision of our portfolio so that we have different kinds of capability areas where our products are contributing value, and we want the AI and AI Agentic technologies to be in the center, supporting the workflows, supporting the automation and be part of our -- every product that we do. And then for us to deliver on the AI promise to the market, for us to deliver on our strategy road map, we conducted a change negotiation for renewing our skills and competencies within Admicom in May. And as a reminder, this is our strategy for the next couple of years that we launched in December last year. So how to get back to more than 15% organic growth rate, how to aim for EUR 60 million ARR by end of year '28, how to build the road map towards the EUR 100 million goal for us in extending our addressable market, tripling that with entering new markets outside of Finland and Estonia and how to deliver on the more than 40% adjusted EBITDA for our existing businesses, excluding some of the M&A effects and some of the new markets potentially operating with a lower margin levels than the home market. And how to build the one winning team and this change management process was a lot about building the winning team for Admicom to deliver on this strategy. We have been mentioning that we are executing the strategy on 5 different execution streams, building our platform capability, transforming our go-to-market to include more customer success kind of a function, bringing more digital sales capabilities, automating some of the sales-related activities, building more self-service functionality for the customers. International expansion, moving to new markets outside of Finland and Estonia with mergers and acquisitions, but also with some organic steps outside of Finland and Estonia. We have the business services that is an evolution from the accounting and payroll services alone to more advanced financial management services, different kinds of third-party value-add services. And in June, our business services launched a new service packaging for our customers where we have more comprehensive service offering that we can bring to the market, bring to the customers to help them with their financial and HR and payroll processes. And of course, we need to make sure that we have the right processes internally. We're using AI technologies effectively in our internal operations, and we built systems that are supporting the processes and our growth moving to more international business and also to scale the business forward. But not only that was in the backdrop of our change negotiation, but also the current changes or things that are happening in our operating environment. Of course, now this prolonged downturn in the Finnish construction market puts us in a position where we need to start to accelerate the international market growth and penetration to the new markets outside of Finland. And as one activity around this, we are adding more sales capacity in Estonia, and we're also introducing Admicom products -- more Admicom products to the Estonian customers to create more cross-sell opportunity in the Estonian market. Of course, this acceleration of opportunities with AI, both in terms of our internal process development, but also in terms of our product development. We need to further bring capabilities and skills to our teams to know how to develop AI capabilities and how to use AI in our internal processes. Also the competition and the competitive landscape is moving forward all the time. It's further consolidating in the market. So we have to keep on pushing our capabilities to be differentiated in the competition. And with the good results or promising results in the Q2 sales bookings, we also saw very -- many great opportunities where we were able to take customers from the existing competitive platforms to our products and systems. So we need to continue pushing our competitive advantage in the market. And of course, we need to bring more commercially focused skills and competencies to our teams to be able to understand where we can deliver value to the customers, where we can add value and help our customers to build better. So bringing also more deep industry expertise to our team and also to strengthen our commercial knowledge and capabilities as well. And as a result -- as an outcome from the change negotiation, 38 roles have been discontinued and they have ended now during Q2. Altogether, approximately 60 roles will change, like I mentioned in the beginning. And these investments back in the organization are around the growth acceleration, strengthening our customer success operations, building competencies around the multichannel sales capabilities and also to strengthen our resourcing in the international markets. Also, we need new skills in the platform and AI capability as we are building more unified platform strategy, we need to have new sort of skills and competencies there. We need to accelerate on the AI skills, and we need to faster -- have a faster product innovation cycle so that we can bring more capabilities to the market faster. And also internal operations, how we bring AI to the internal operations -- for the internal operations, but also in business services. So how the business services can automate their processes to have more higher productivity and more efficient operations. And Satu will cover some of the financial aspects of the change negotiation. And also now we have started the recruitment of the new capabilities. And there, you can see some of the examples of open positions that we have now introduced as new openings and vacancies, AI adoption engineer helping us to transform our own product development processes to be more AI-native, AI software builder, new kinds of software engineers that are doing things very AI natively. We want to hire customer success manager roles that are helping customers to get value from the products and then more commercially focused product managers. So these are the examples of the roles that are now part of our transformation and new skills that we are onboarding to the team. All right. But let's go to the financial highlights. Satu, please, over to you.

Thank you. So as mentioned, we issued a profit warning in June. And the main driver for the profit warning was the market environment that we are seeing at the moment. The profit warning was about the growth expectations. We maintained the profitability expectation unchanged. One might wonder when looking at the graph, for example, on this slide that how come is the market not growing when the gray bars are showing over 5% growth rates for multiple months already in a row. However, the market growth statistically is driven by a small number of data center projects and defense sector investments. So we're definitely not seeing a more broader market recovery yet. And for example, for our own customers, there are certain subsegments in construction industry that are seeing stronger signals of recovery, for example, HVAC. And of course, our goal is to focus our sales efforts on those customers who are performing well and those industries for whom the market is already a bit better. Simo mentioned the great sales progress in the second quarter. That was obviously great. We are very happy about that. However, the challenging market continues to put some weight on our growth expectations also for the upcoming quarters. For example, in June, we have received information of multiple bankruptcies. About at least 5 companies went bankrupt, and those were -- those kind of companies whose invoicing for us has been above average. So the uncertainty related to the market is still very high, and it continues to cause insolvency-related churn and bankruptcies for companies who have made it so far in the prolonging downturn. While we focus our own efforts on what we can do, obviously, a more positive market environment would have a lot of benefits for us. Of course, sales would be more successful in a more positive market environment. We would also see much higher upsell because of customers' revenues growing, customers' numbers -- a number of projects and number of users growing. And of course, the number of insolvencies could significantly go down if the market recovery finally started. Although we are moving away from the historical annual adjustment fee billing model, this quarter, we cannot avoid talking about the effect of this transition. In the second quarter, the impact on our growth rate and also on the profitability rate are the highest. And the reason for that is that historically, the annual adjustment fees, majority of those have been invoiced and also recognized as revenue in May, so during the second quarter. Last year, we transitioned approximately half of our Ultima and accounting services customers to the new monthly adjustment fee model and approximately half is still in the annual adjustment fee model this year. Last year in the second quarter, the amount of annual adjustment fees that was recognized fully in the second quarter was EUR 800,000. And now this year, it's EUR 300,000. So it's minus EUR 0.5 million in the second quarter numbers. The reported ARR growth, 4.1%. For ARR, the decline in adjustment fees is about 1.5 percentage points negative. And for recurring revenue and revenue growth numbers, the effect is higher, approximately 4.5 percentage points. So we are reporting flat revenue and recurring revenue growth this quarter. Customer churn continues to be elevated. It's above our own targets. And in the second quarter, again, approximately 40% of churn was related to customer insolvencies. We also continue to see a quite high amount of churn related to the market consolidation that we have discussed already in the previous quarter. So when the market is challenging, larger companies are buying the smaller companies. So that can result in churn for us in short term. But obviously, that's also an opportunity for us. And we have seen good progress in these cases where this broader group customers want to consolidate more of their services to Admicom. One quite interesting data point, a forward-looking data point from June is that 80%, so 80% of Ultima customer terminations was related to bankruptcies and churn. So very little sort of dissatisfaction or voluntary churn in June. But of course, those bankruptcies and insolvencies will then result in churn in the coming months, depending on how long the customers continue to use Ultima. Profitability was 31% in terms of adjusted EBITDA, and it was in line with our own expectations, and let's have a closer look at that next. So in the adjusted EBITDA, we have about 1 percentage point decline from the comparative period. But of course, the declining annual adjustment fees also impact profitability because the invoicing and recognition of those annual adjustment fees have had a direct impact on profitability. They have no costs attached to them. So if we excluded the approximately 3 percentage point impact on EBITDA from the annual adjustment fees, we would have been on a positive trend also this quarter with profitability. This quarter, we have high amount of adjustments to EBITDA. And naturally, they relate to the change negotiations. So EUR 1 million of costs which are sort of extraordinary or one-off in the second quarter. EUR 800,000 of those costs are related to personnel expenses and approximately EUR 200,000 are other operating expenses. One additional item affecting our profitability is the capitalized R&D. So throughout the first half, we have capitalized less than we did last year. So the impact -- the negative impact on the profitability from the lower level of capitalization is approximately 0.6 percentage points. And as a reminder, the quite big gap between EBITDA and EBIT relates to the goodwill amortization that we recognize as a Finnish accounting standard complying company. So we're not an IFRS company. ARR development, obviously not meeting with our own targets and expectations for the first half. We have about EUR 500,000 decline from last year-end. We issued a profit warning and majority of the reasons related to the weak ARR development in early '26 was explained already. However, in the original forecast for this year, our growth was more heavily tilted towards second half. And one thing to note is that in the first half, we don't have any effects from price increases, but we will have those in the second half. Before talking about the churn or the ARR development for the first half, one thing worth mentioning is that in the Q1, when we reported the ARR bridge, we had a small error in the figures. So it's related to the categorization between downsell and churn and between upsell and new sales. And the details can be found from the orange text. The amount of error was about EUR 200,000. When comparing first half of '26 against first half of '25, we are slightly ahead with new sales and upsell, about EUR 100,000 in each ARR element. However, the downsell and churn are quite high in the first half. And for example, in churn, we have already about 400,000 more churn than we did a year ago at this point. And then finally, let's recap our financial guidance. So that was now updated with the profit warning in June. And we expect now ARR to grow by 3% to 10%, total revenue to grow by 2% to 6% and adjusted EBITDA guidance was remained unchanged. So we expect 31% to 36% adjusted EBITDA this year. And some themes affecting the growth and profitability have now been sharpened or changed a little bit since the profit warning. So for example, when we first issued the original financial guidance, we had a slightly more positive view of how the market could recover this year. And now unfortunately, the uncertainty related to whether the market will improve this year or not has significantly increased. And of course, the latest news about customers going bankrupt is obviously a negative sign for us. In the original guidance, we noted that H2 was high in terms of customer terminations and churn. But unfortunately, that has now continued also in the first half, and there's a lot of insolvencies and bankruptcies that are driving high churn. From profitability perspective, of course, the change negotiations now mean that the cost base for this year will slightly go down. But there is a lot of uncertainties still related to the H2 cost base and what the profitability will eventually end up being. And the uncertainty relates to, for example, the recruitment. So how fast are we able to find the right people? Are we able to onboard them during the second half? So there's obviously like a timing uncertainty related to the recruitment. Also, when we first calculated the potential effect of the change negotiations for 2026, we also put in some reservations for higher amount of external spend in the second quarter. So the plan is that while we are building the competencies, while we are recruiting the new people, we will also bridge the competency gap with some external services, and we have already started a little bit, but how much of that sort of external spend reserve will be utilized remains to be seen in the second [ half ]. I think that covers our presentation for today, and then we can go into the Q&A.

All right. There's already plenty of questions in the chat, but let's start from the studio. So over to you, Atte.

Atte Riikola from Inderes. Maybe first about the Q2 sales bookings growth. Is it mostly about -- if the comparison period is bad? Or is there like really meaningful growth also in euro terms?

Yes. We were looking into the comparable figures, and we saw a consistent improvement across all the months actually in Q2. And it was already a trend from Q4 from '24 to '25 and now from '25 to '26. And they are quite significant in terms of the euro volume. So we were quite pleased with the with the outcome for the sales booking. And there's also another question related to sales booking that when we say sales booking, what do we mean? So it's the order intake. So the orders that we have received, the contracts that we have made that are not yet converted into ARR. So once the implementation is complete, then we start the invoicing and then it converts into ARR. So it's contracted sales booking that has been generated during the Q2.

All right. And what did you do differently in your sales team in order to achieve these better results now in Q2 compared to Q1?

Yes. The learning we took from Q1 was that we need to start to focus on delivering every month at the expected level and with the high sales results. So we have made some changes in the incentivization to accelerate this. We have new Chief Growth Officer, Jesse Parnanen, who has been really focusing on making sure that we're doing a proper job in managing the sales pipeline and the sales performance across every individual. We have been taking into use some new sales tactics when it comes to larger deals and larger group entities where there's multiple smaller companies within a group entity that we can then tackle as a whole, as a group, so we can -- at once, we can get a contract for multiple companies rather than going them one by one. So we have changed some sales tactics. We have improved sales management and ensuring that we have the right performance for every individual. And also, we have put in some carrots for the salespersons to drive a good result. So every good thing that you have to do for boosting the sales.

And you mentioned that you are accelerating growth investments in Estonia. So can you open up that a little bit?

Yes. So we have had a very successful run with Bauhub in Estonia. We have seen a good customer growth there. We have seen more projects utilizing Bauhub as a product, but we have not yet entered the market with other Admicom portfolio products. So we did an investigation in the market that which of the Admicom products that we are delivering in Finland, has the best market fit and the most demand in the Estonian market. And we saw that especially around the bid management and cost estimation, there's a good market opportunity there. And now Estima, our cost estimation tool has been localized for Estonia, meaning the Estonian language, but also the Estonian way of calculating the costs for the construction projects. And now we have started the recruitment for a sales manager to drive that business forward in Estonia. So gradually, we're uplifting the investment for the Estonian market. But there's also an additional question in the chat regarding this investment. Obviously, when we invest into Estonia, we're looking into other Baltic countries as well. So Estonia is in a way, a bridge and for us to also start entering the other Baltic countries. And Bauhub already has some sales activities in Latvia and Lithuania, and we're also starting to leverage that collaboration that has been already existing with some local partners and with some go-to-market activities in those countries for other products as well.

Let's then talk about the M&A market and the situation there. You have mentioned that the valuation difference between Admicom compared to private companies is one factor affecting that you cannot close some deals. But in general, is there like lots of companies still available? And it's the only thing about the price? Or how is the situation?

Yes. So thanks to Henna Kotilainen leading our efforts in this M&A side as part of our international expansion strategy execution, we have been conducting a very systematic outreach program for potential target companies. And we have been internally calling it like finding a needle from the haystack, but I'm confident that there is a needle. So there are some promising opportunities that we can find from the market. And of course, timing can be very challenging to estimate when is the right time, and it needs that everything is lined up. The criteria needs to be met from our side and also the seller side needs to be having the right moment for their ownership to be changed and so on. So it's affected by multiple different factors. But we do have some very, let's say, active conversations in the market, nothing to a level of a real project yet, but the systematic outreach is definitely starting to improve our understanding of the overall M&A market. And also, we have gained more understanding about different markets overall. So which market is at the stage where the development and the market maturity for digital technologies in the construction is at the stage where we feel like it's the right timing for us to enter the market as well. So there are certain positive signals from the market. And despite our heavy discount in our share price, we do still believe that there are companies out there with reasonable multiples, reasonable EVs that we can go after and use those as our kind of like M&A growth activities according to our strategy really. So we have been very also diligent about our criteria that we set in the CMD in December, what are we looking for. So we have been very diligent in following those criteria as well.

You have, at the moment, really strong balance sheet and you're generating good cash flow. So are you considering doing more buybacks with the current valuation?

Maybe you can, Satu summarize also the first year half.

Yes. Yes. So if you look at the amount of cash that has been returned back to the shareholders, so we did EUR 4 million of share buybacks and approximately EUR 1.8 million in dividends. So that's EUR 5.8 million, and our operative cash flow was EUR 5.6 million. So basically, we have returned all the cash flow to the shareholders already. Share buybacks definitely still in the toolbox, something that the Board will then decide if we want to do more.