Exsitec Holding AB (publ) (EXS) Earnings Call Transcript

Hi, and welcome, everyone, to this web presentation of Exsitec's Q3 report for 2026. My name is Edwin, and I will be moderating this webinar. Here to present today are our Group CEO, Niklas Ek; our Group CFO, Carl Arnesson; and the CEO of Exsitec Norway, Anders Ranum Nordahl. [Operator Instructions] Now over to you, Niklas.

Thank you, Edwin. Hello, everyone. This is Niklas Ek speaking. I am the CEO at Exsitec. And I will start off by making a short recap about our business, as a reminder, what we do. After that, we will cover Q3 financials and a short market update and also our priorities going forward. We are Exsitec, making IT work together. Our business is about helping companies improve the way they operate through digital solutions. We aim to be a one-stop shop for our customers, taking responsibility for their business-critical systems. We do this by combining software from different vendors with our own integrations and expertise. We are not tied to 1 single system, but can select the combined solutions based on what each customer actually needs. But what we do is not just about technology. A large part of our work is about understanding our customers' businesses, their processes, and how they operate, and then finding the right solutions to improve them. This could be anything from reducing financial administration through automation to improving supply chain processes or helping management make better decisions based on data. And importantly, our relationship with the customer doesn't end when a system is implemented. We continue to support, maintain, and develop their solutions over time, building long-term relationships. Exsitec is a Nordic company originally founded in Linköping, Sweden back in 2000. Today, we have more than 700 employees across the Nordics, with Sweden being our largest market. Over the past decade, we have established a strong track record of growth, both organically and through acquisitions. And importantly, we have managed to combine that growth with strong profitability. Our EBITA has developed largely in line with revenue, with 2024 being the main exception. Best of breed is how we approach our customer solutions. Many of our deliveries are centered around the ERP and finance system, which acts as the core. By selecting the right software components and making sure they work seamlessly together through our in-house developed integration, we can take full responsibility for the entire solution. Our business model is built around 3 revenue streams. Our sales and marketing efforts are primarily focused on selling software and integrations. This is mainly sold on a subscription basis, generating recurring revenue, and currently accounts for approximately 28% of our total revenue. The largest part of our business, just under 2/3 of our revenue, comes from professional services. This is where we implement the software adapted to the customers' needs and help them make the most of their systems over time. We also provide custom development and integrations when needed. And the third revenue stream is support, where we offer our customers a single point of contact for their systems, typically through recurring fixed-price agreements. Together, these 3 revenue streams allow us to support our customers throughout the entire life cycle of their business systems. Today, we serve around 7,000 customer organizations, primarily medium-sized and large companies across the Nordics. Our customer base is well diversified, with no single customer typically accounting for more than around 1% of our total revenue. This gives us a very low dependency on individual customers. By combining different software solutions, we can address the needs of companies across a wide range of industries as illustrated on the slide. These are the primary software providers and partners that we work with today. We are resellers of more than 20 selected software components, which we combine with integrations developed in-house. Our partnerships are based on revenue-sharing models where we help software providers reach new customers by marketing and selling their solutions. But our role goes beyond sales. We also take responsibility for implementation and help customers make successful use of the software over time. And this makes us an important long-term partner, both for the software providers and for our customers. I also want to explain a bit more about how we typically work with our customers, because our delivery model is quite different from traditional IT consulting. We normally start with a clearly defined project, typically lasting a few months. Rather than starting with a large multiyear IT project, we prefer to start with something manageable, deliver value early, and then build from there. Once the first project is completed, we often move into Phase 2, Phase 3, and so on, gradually expanding the solutions we deliver to the customer. Another important difference is what our consultants actually do. Most of their time is spent understanding our customers' businesses, processes, and workflows, and finding ways to improve them through technology rather than writing code. In fact, we estimate that less than 10% of our total consulting time is spent actually writing code. Our consultants also typically work with several customers every week, often around 10, rather than being assigned full-time to 1 customer. And since we mainly work from our offices when we're not visiting customers, we can easily share knowledge and experience between colleagues. A solution developed for 1 customer can often be adapted and reused for others. So our model is really about delivering value step by step, building long-term customer relationships, and continuously sharing and developing our expertise across the organization. Exsitec runs 1 of the largest trainee programs in the Nordics and has done so at scale since 2015. We are very proud of this. And today, almost 40% of our employees started their careers with us as trainees. The trainee program is our primary source for recruiting new talent and an important driver of our long-term growth. In August, we welcomed another group of trainees with a 2026 intake being in line with the previous year. This allows us to continuously develop talent and build the expertise we need to support our customers and grow the business over time. So let's dive into specifics for Q3. I will start off with the highlights and then leave the word to both Anders Ranum Nordahl, our CEO in Norway; and then Carl Arnesson, our CFO, for the financial details. Overall, I'm pleased with our performance in the third quarter. We delivered 23% year-on-year growth, primarily driven by the acquisition of Amesto Solutions, while organic growth was 3%. Adjusted EBITA reached SEK 30 million, corresponding to a margin of 12.9%, slightly below last year's level of 13.5%. Our recurring net software revenue continues to develop strongly, reaching SEK 270 million on a last 12-month basis, up 24% year-on-year. Importantly, organic growth in recurring software revenue reached 14%, showing that we continue to develop this part of our business also organically. Order intake was another positive highlight, increasing by 23% compared with the same quarter last year. And finally, the integration of Amesto Solutions is progressing according to plan. During the quarter, we also implemented restructuring measures across all 3 segments, creating a more efficient Nordic organization and improving our prospects for future profitability. The acquisition has had its greatest impact in Norway, where it has significantly strengthened our business and expanded our recurring revenue base. So I will hand over to Anders, CEO in Norway, who will tell us more about the acquisition and the development of our Norwegian business. Anders, over to you.

Thank you, Niklas. My name is Anders Ranum Nordahl, and I'm the CEO of Exsitec Norway. I've been in this role for the past 3.5 years. I will give you a brief update on the integration of Amesto in Norway, what we have accomplished during the quarter, and where our focus is going forward. From the beginning, our ambition has been to integrate the 2 companies quickly, so that we can start utilizing the synergies as soon as possible. We have, therefore, worked hard during the quarter to complete the integration activities. We have implemented a new organizational structure for Exsitec Norway, combining the strengths and the capabilities of both Exsitec and Amesto. A new management team is now in place with experienced leaders from both organizations. With the changes we made and the team we have in place, we have strengthened our ability to deliver more complex projects, support customers over time, and build long-term customer relationships. As part of the integration, we also identified overlaps in roles and capacity. This resulted in a workforce reduction, which was completed during the quarter. We also completed an important part of the integration by bringing our Oslo teams together in 1 location. The Amesto team in Oslo has now moved into Exsitec's main office, bringing more than 100 colleagues together in our largest location. This creates a stronger concentration of expertise and provides better opportunities for collaboration and knowledge sharing across teams. The majority of the integration work is now behind us. This allows us to shift our attention from integration to growth and to the market opportunities created by the combination of Exsitec and Amesto. Going forward, our focus will be on strengthening our position in the Norwegian market, making full use of our capabilities, and make sure that both existing and new customers experience the added value of the combined company. I'm very pleased with the progress we have made on the integration during the quarter. I'm also very excited about the team we now have in place, the new structure, and the opportunities ahead. I'm really looking forward for the next phase of this journey. And that concludes my short update on the Amesto integration in Norway. Over to you, Carl, for the financial details.

Thank you, Anders. As mentioned, we carried out a group-wide restructuring of our business in Sweden, Norway, and Denmark in Q3 following the Amesto acquisition, aiming for a more efficient organization and to realize cost synergies. The one-off restructuring costs of approximately SEK 27 million covers mainly staff reductions, but also other cost synergies such as offices and other OpEx. The main part, over 60% of the one-offs, are related to our Norwegian business due to the size of the acquired Amesto business in Norway. The one-offs have been excluded in our adjusted EBITA and have had a limited effect on our operating cash flow in the third quarter. During the integration process, we have identified higher synergies than we expected initially. The restructuring is estimated to generate net cost savings on a group level of around SEK 35 million on an annual basis with full cost effect from Q1 2027. By this action, we have no further one-offs planned following the Amesto acquisition. Moving over to our net sales in Q3. We report a 23% growth in Q3 versus last year. If we exclude both divested and acquired operations, the organic growth was plus 3%. We see organic growth in all our segments, although it varies a bit between the different countries, and I will come back to the development per segment shortly. Our growth comes mainly from recurring revenues from software that stands out also in this quarter, as Niklas described, both in terms of total growth as well as organically. Our professional services in Q3 were a bit lower in Norway and Other Nordics in Q3, while Sweden was a bit stronger, as it was in Q2 as well. New projects driven from our sales department continues to develop positively, but we still feel that customers in general are a bit cautious and tend to push decisions of minor updates and adjustments into the future. Moving over to our adjusted EBITA. We report a SEK 30 million profit, which is an 18% growth versus the third quarter last year. Main drivers behind the uplift is continuous growth in recurring revenues, but also by a solid cost control from an organic point of view. As I mentioned, we report one-offs of totally SEK 27 million related to the group-wide restructuring after the Amesto acquisition. So these costs, again, has been excluded in our adjusted EBITA. Despite the year-on-year growth in adjusted EBITA, we still feel we can deliver even stronger performances and profitability almost across all our segments. Even though we have seen organic growth also in Q3, we now have a more efficient organization in place, which is a good foundation for an even stronger long-term and profitable growth going forward. Year-to-date, the adjusted EBITA of SEK 128 million equals a growth of 11% versus last year. So let's continue with the net recurring revenues from software that grew 24% compared to the LTM revenues last year in this revenue stream that has reached 28% of our revenues on an LTM basis. This growth is, of course, driven through price increases, but also by volume and our new sales that has been strong for several quarters in a row now. And finally, a certain part of the growth, of course, also comes from M&As in this quarter also from the Amesto acquisition. Overall, the organic growth LTM as per Q3 summarized to approximately 60% of the total growth or 14% year-on-year. This development is, of course, a very important contributor to our earnings, and it also indicates the strength with our business model. But it's also a good indicator for us that we have a strong offering and that our customers continue to use and deploy the software that we deliver. Here, we see a consolidated view of the net sales and the adjusted EBITA margin for the Exsitec Group. The adjusted EBITA margin of 13% was slightly lower versus Q3 2025. For the last 18 to 24 months, we've seen a more solid margin stability following stronger recurring revenues, a good cost control, while the organic growth also has improved step by step. In addition to this, it's also satisfying that we continue to see a general increase in the net sales per employee. Regarding our different segments. First of all, Sweden delivers a 2% growth year-on-year in Q3, while the organic growth was plus 3% if we exclude the divestment of the Zedcom business and the Amesto acquisition. The adjusted EBITA margin also developed positively and ended up at 12%, slightly above last year. So we delivered stronger growth and maintained the margin trend from last year. So Sweden continues to develop well with a gradually stronger demand in combination with an improved efficiency in the professional service operation. Norway reported a 76% growth in net sales year-on-year in Q3. Excluding the acquired Amesto business, the organic growth in local currency was plus 1%. In Norway, it's also satisfying that we increased our adjusted EBITA and margin in Q3 to 18% versus 15% last year. The restructuring of the development department we made in Q2 is, of course, 1 of the explanations behind this, but not only. Also the recurring revenues continue to grow positively and contribute to the margin uplift. As we said in previous quarters, we have been satisfied that we managed to get a higher and more stable margin in this segment. With the restructuring carried out now in this quarter with the most impact in Norway, we feel that, Anders also mentioned here that we are well positioned here going forward. And finally, our third segment, Other Nordics, covers our offerings in Denmark and Finland, reported a growth of 26% in Q3, where the organic growth in local currencies was plus 2%. Our Danish operation had a very strong Q3 2025, and we've managed to improve the margin compared to previous quarters this year. But despite this, we feel that the margin can improve going forward. And the integration of the Amesto business and the more positive trend in our order intake gives us a good foundation for the future here as well. In addition, it can be mentioned also that our Finnish operation delivered solid revenue development also during this quarter. And by that, I hand over to you again, Niklas.

Thank you, Carl. I will continue with a short update on the market conditions and our priorities for 2026. Moving on to market conditions. We continue to see a slow but positive improvement, although development varies between countries. Sweden is currently showing somewhat stronger development than our other markets, particularly within consulting services, where we see improving demand and utilization. Sales momentum also remains positive with a strong order intake, as mentioned before. I've talked about pent-up demand in previous quarters, and we still believe there is a growth potential within our existing customer base. As market conditions slowly improve, we see opportunities for customers to move forward with investments in projects that may have been postponed. AI is developing rapidly, creating new opportunities for both our customers and Exsitec. While we don't yet know its full potential, we believe we are well positioned to benefit from this development. A large part of the value we bring to our customers comes from understanding their businesses, processes, and needs and making different systems work together. It's all about combining business understanding with technical expertise. We see opportunities in several areas. First, our software partners are continuously adding AI capabilities to the platforms. This creates opportunities for us to help customers implement these features and adapt their ways of working. Second, we're developing our offering in AI agents and automation, connecting different systems and enabling customers to automate specific business processes and tasks. And third, AI is making software development more efficient. We believe this can improve productivity in our deliveries and make more solutions affordable for our customers. We're also actively sharing knowledge with our customers. Two weeks ago, we held our AI Week focusing on practical examples of how AI can create value across different business functions. Moving on to our 3 business priorities for 2026. I'm pleased with the progress we are making across all 3 areas. Starting with BNXT from Visma, we continue to see good momentum with new deals across all 3 segments. The acquisition of Amesto Solutions has also given us a larger customer base and additional expertise, particularly strengthening our position in Norway. This creates good opportunities for further growth. Turning to Microsoft. We have had a strong start in the autumn with good order intake for Business Central, Power BI, and Fabric. And finally, organic growth remains 1 of our most important priorities. We see opportunities to increase our growth rate by taking advantage of improving market conditions and continuing to develop our relationships with existing customers. And finally, a quick reminder of our financial goals. Our growth target is to increase net sales by at least 15% per year over time. We also aim to increase adjusted EBITA per share by at least 15% per year over time. Our financial stability target is that net debt must not exceed 2x EBITDA, and our dividend policy is to distribute between 20% and 40% of profit after tax. As we move into the final quarter of the year, we have a larger Nordic business and a more efficient organization with long-term profitable growth as our objective. So that concludes our presentation, and we're now happy to take your questions. So are there any questions for us, Edwin?

Yes, indeed. We have questions from an anonymous participant. When you acquired Amesto, what yearly run rate of cost savings was in your calculations since you write that you realized more?

I can go on that one. We estimated approximately SEK 10-plus million. So the net savings has been significantly more.

Perfect. Also from anonymous, the order intake grew 23%, in line with your revenues. This is a shift from previous quarters where order intake grew more than revenue. What is your view on this?

Well, we have not really put those together to see anything between them. So I think if we look just for the order intake and the increase of 23%, we are pleased with that. I think that's higher than we reported in Q2. And just a reminder, when we're talking about order intake, that's from new customers, new logos coming in to Exsitec, so we can help more customers and also existing customers that we can deliver a new offering to. And for us, when we report order intake, it takes a bit of time before we actually see that in the numbers, in the revenue. So we have like a project that usually can start pretty soon after a closed deal, so that we can see in our books pretty early. But then when it comes to the recurring revenue and the support, that may take some time before we actually see that. So say, for example, that a project runs for 3 to 6 months, then maybe it's a delay from when we actually report the order intake up to 6 to 9 months before we can actually invoice the support and the software. So that's a delay from the actual order intake to when we see it in the revenue. So I don't think that you should draw any big conclusions between the order intake and the actual growth rate for the total.

Perfect. Then we have Thomas Nilsson. I will try to let you into the call. There we go.

Can you hear me?

Yes.

Okay. So first, this quarter saw a bit slower organic growth than in Q2. What's your outlook for organic growth for the rest of this year and for 2027? And my second question is, what would need to happen for Exsitec to return to sustainably higher organic growth? Is the main constraint customer demand, project starts, or your own sales execution?

Yes. So if we start with the first one, so that the organic growth was slower in Q3 compared to Q2. That's correct. We had 8% in Q2, and now we have 3%. But if you compare the quarters, so in Q2, we had easier comps, if we just look at that. And in Q3, we had tougher comps. So last year, we performed 6% organic growth. And I think you just need to bear in mind that the Q3 quarter is a bit special since half of the quarter just goes away with holidays. So I don't think that you should look into Q3 and draw any big conclusions from that. But also, if we look in the past like 5, 6, 7 quarters, we've been sometimes over 0 and sometimes below when it comes to organic growth. So I think this 3%, it's okay. We're feeling pretty pleased with that. But if we look forward, we don't give out any forecast in what we think that we should perform in Q4 and 2027. But as I've mentioned before, we have the financial goal of 15% increase in revenue. And I think healthy over time is a mix of like 50-50%. So if 50% can be organic and 50% comes from M&A, I think that's pretty healthy for us. So that's something that we're aiming for, and that has been the priority for the entire year of 2026, to increase the organic growth. And I think it's a combination of things that we do to actually achieve that. So first of all, we need to continue with the strong order intake, and we're pleased with that in this quarter, and we have been pleased with that for, I think it's 6, 7 quarters in a row now. So we have a big sales force out there working to bring in new customers and to talk to existing customers, to expand the solutions and offerings that we are working with. So that's one part. But still, that's the biggest part, and if we're going to be successful with the organic growth is that we can actually take care of our existing customers. So if you look at our different revenue streams, the biggest revenue stream is professional services, just under 2/3. And from that, almost 80% of the revenue is from existing customers. So it's important for us to still be out there talking to the customers, suggesting new solutions, bringing customers from on-prem system to the cloud versions and so on, and also take care of all the AI possibilities that's coming now. So it's a combination of those and also take care of the existing customers, not to churn any customers at the same time. So I think that's -- was that maybe answer to both of your question? What was the other question you had?

No, that was a good question (sic) [ answer ]. And also reassuring that you say that despite 3% organic growth this quarter being lower than in Q2, you're mentioning easier -- or more difficult comps, and also it's holiday season in Q3 was reassuring that we should not be extrapolating this into the future. So thank you very much for those answers.

Thank you. Then we have another question from Jacob Benon.

Can you hear me?

Yes.

Niklas and Carl and everybody, congratulations on very strong performance here. I have a couple of questions, so I'll dig right into it. Firstly, maybe a question to Carl. Out of the like SEK 27 million in items affecting comparability here in the quarter, can you give us any rough split between personnel cost and other external costs there? Is it like 50-50 or tilted to some of those line items?

Yes. Approximately SEK 17 million, SEK 18 million or something is staff related. The rest is OpEx.

Perfect. And just curious, I mean, I think you said now that your initial assumption regarding savings in Amesto was somewhere around SEK 10-plus million. And now you think you can save SEK 35 million. That is a pretty big discrepancy there. What really happened that made you find another like SEK 25 million or so to save?

Yes. Initially, in the project, we estimated only basically with general cost synergies such as office-related and stuff like that. And we did not look into staff synergies or staff reductions at all basically. That has been clear for us during the process that there are some overlaps in the organization. So that is why we've added those in the synergies.

Okay. That's always good to be conservative. And moving on here with items affecting comparability or maybe not then. I noticed that you had another like SEK 6.9 million that has impacted adjusted EBITA. But I mean, to me, it seems like a one-off, but it seems like you didn't adjust for this, if I understand you correctly. So why was this cost not adjusted for? Or is it anything special with that item?

Yes. I saw that Martin and Davis posted the same question as well. That's right, we have those severance pay costs here in the third quarter. And we normally have those in every quarter, and we don't adjust for them since we think that, that is something in the ordinary course of business when you have a company like Exsitec. I think we had the topic also when we discussed Q2. But the reason why we mentioned this in the report for Q3 is that the level of the cost here in Q3 stands out quite a bit. So normally, that level perhaps is somewhere around SEK 1 million to SEK 1.5 million or SEK 2 million per quarter. This quarter, SEK 7 million. So that's why we mentioned it. But we don't normally adjust for these kind of costs. They are not related to the restructuring following the Amesto acquisition. So it shouldn't be mixed up.

Okay. So it's actually like a recurring cost for you every Q3, but this Q3 was...

Not only in Q3. It's not Q3 related as such. We have these kind of redundancy costs in every quarter more or less. Sometimes they are very low, but this quarter, very high.

Okay. And since you say that this quarter, it was very high, I suppose, maybe SEK 7 million is not a level you expect going forward?

No, no. That's correct.

Okay. Two more questions for me, then I will hand it over to the other ones. The average number of employees was 660 during the quarter. Just wanted to see like how we should view that number together with the restructuring and cost savings you have done and also the trainee program at the same time. Like how does those 2 things affect that number, just so we know how to think about headcount going forward?

When it comes to trainees, we welcomed approximately 60 new colleagues in August, in mid-August. So in the average employee number for Q3, it's only half of the period included for those trainees. So that's why. And when it comes to the redundancies, more or less all people were working during the quarter.