Vitec Software Group Aktie

Welcome to Vitec Software Group Q1 2026 Report Presentation. [Operator Instructions]

Now I will hand the conference over to CEO, Olle Backman, and IR, Patrik Fransson. Please go ahead.

Thank you. And sorry for that 15 minutes of a hiccup. There were some technical issues. But anyhow, welcome to this conference call. I'm Patrik Fransson, Head of Investor Relations at Vitec Software Group. And with me in the room is our CEO, Olle Backman.

As always, we will first give you a short overview of Vitec and then followed by comments on the report released earlier this morning. And after that, we will open up for any questions. So Olle?

Okay. Thank you, Patrik. And again, sorry, obviously, not the Vitec software that was used for this. But like Patrik said, always starting with a short intro on the group level and then moving over to the Q1 results. So this picture by now many of you, starting with the customer perspective, 27,000 customers by now. We have 49 business units. We started the year with 47. So we added 2 acquisitions during the first quarter. We have our feet on the ground in 13 countries and the pro forma sales, is after the 2 latest acquisitions, up to SEK 3.9 billion roughly.

And you can see the distribution of sales there across the different geographies. And you can see that we have roughly 25% in Sweden, which means that, of course, we are exposed to the foreign currency fluctuations for good or bad. And to my help, I have nearly 1,850 colleagues by now.

Moving over to also the further breakdown of this diversification. The first pie there, you saw that on the previous picture, so that's the sales by market. If you break down on the business units, so no single business unit is more than 7% of the total and also on the customer side. So the top 10 customers are not more than 7% of the group, which, of course, gives us a great risk distribution.

Moving over to how we operate a bit. I mean, we have a business model, of course, that we work with the business units that we have. They are usually the market leaders. They do have a high degree of recurring revenue, and this is something that we continuously work upon. So we further develop them through the decentralized organization, a lot of product investment focus here, and that really fuels the organic growth. So we work with what we have, the 49 business units. And then we try to top up that with acquisitions each year. So far, 2 this year. So -- and the characteristics that we look for.

Also very familiar by now, of course, vertical -- the vertical approach to everything. We look at well-established profitable companies that have been around for a while. So they are usually the market leaders. They do have a proprietary software so that we are in control over the product development, and we do that with mainly internal resources, and they have the recurring revenue model already to start with. So that is sort of a few of the characteristics that we are looking for.

And then moving over to acquisitions for the past 12 months here, you can see we did 2 during last year, Q1, Q4, and then we started off really well in Q1 this year with Dutch Autonet and Swedish Infometric. And you can see on the pie there, the various acquisitions throughout the year. So for this year, it has been quite a good start, as we say, adding nearly SEK 175 million in terms of acquisitions to the growth.

Sales by vertical, this is also a way of distributing the great, sort of, distribution across the 22 different verticals that we're in, property management being the largest one, followed by energy, health care, auto and finance, but we are not at all opposed to adding a few new bubbles on this chart. So when we look at these verticals, it can mean that we add another vertical or that we buy a company that further develops an existing vertical. But we are quite agnostic so that we can do both ways. So that means that we're not sort of solely dependent on any single industry, single customer or single country for that matter.

Business units, this is what they look like in terms of size and the proportion of recurring revenue. You've also seen this quite a few years by now, but it gives us a good overview of the different sizes, and this is also kind of a blueprint for the M&A pipeline, what it looks like in terms of size. So the medium size is roughly a SEK 50 million, SEK 60 million company, and that is kind of what it looks like out there.

The sharing of knowledge across these business units is really the sort of superpower within Vitec. So this is actually one of the most tangible things that a business unit experience when coming into a larger group like ours. So the possibility to tap into the knowledge base of all the other 48 business units. And here, we have some of our specialists for us. So that could be everything from customer support, finance, operations, of course, a lot of focus around AI, UX, sales, marketing and so forth. So this is a very sort of appreciated and very vivid and active part of what we do and how we can cross-fertilize good ideas and really speed up development throughout the group.

Of course, a few words on AI and innovation here. We always have this at the last couple of quarters. But overall, a great speed in the adoption across the group. For internal purposes, of course, we use that to increase our own internal efficiency a lot of, but it's also a lot of new customer applications that are being sort of deployed month by month at an ever-increasing speed. But it's really down to the deep domain knowledge and the expertise that we combine with the proprietary data and all of that, that really sort of strengthen the moats around the various business units.

Here are some examples for the auto industry, Olyslager in the Netherlands, but they sell across the world. So they have seen some remarkable increase in usage. As an example, the garage owner or whomever it is, they can take a photo of the license plate or the VIN number and then they automatically get all the matching components for their lubricants and so forth. It also shortens the time to market so that we can really do all the matching new languages and everything else at a great higher speed and accuracy for that matter.

And you can see a lot of the others, if you go to the other end with Vitec Energy, for instance, our models there that we do help the utilities to forecast their production facilities so that it's now 20 different AI models that we combine together to identify sort of -- identify really complex connections and linear connections between them, so that weather data, that's consumption data that's both on historical and so it's a great value for our customers there and an ever-increasing scalability for that matter. So really encouraging things that are happening throughout the group here.

Moving over to the numbers then, some of the highlights here. So sales increased all in all by 9% to SEK 955 million. The 9%, the mix here is roughly 5% organic. There's 7% from acquisitions, and then we have a 3% FX headwind. But all in all, 9%, and we are really back on track, which is something I'm very pleased with that we increased the profit levels at a higher pace than we increased the sales.

If you remember correctly, I mentioned that in the Q4 report, which was something that we were sort of less happy with that we increased overall last year, yes, but the margin expansion didn't really follow the top line. But now we're back on track where we can sort of increase the margins at a higher pace than we can increase the sales. So 11% up on both EBIT and cash EBIT, which is our sort of internal metric that we use and 13% on the operating profit and also margin increasing by 1 percentage point.

Cash flow, always the strong Q1 here. So super strong as always, but this is really something you can look for at the LTM basis. So what we have in the column there that the last 12 months, SEK 1.1 billion in the total cash flow. So yes, some of the details around that cash flow. Like I said, a fairly strong quarter, perfectly in line with the previous years and really sort of what we expect. Like I mentioned, we usually have all the cash flow coming in, in Q1, and then we have a pretty flat for the remaining 3 quarters of the year.

Net sales, as I mentioned, up by 9% for the quarter, up to SEK 3.9 billion there in the pro forma sales. If you look at the profit levels here, I think it's really encouraging to see the last 12 months there that we're sort of back on track to increasing margins again. So really promising, 1 percentage point up on the margin there on the quarter also from 25% to 26%. And the cash EBIT, which is sort of net of any activations and amortizations, so very close to the operating cash flow. Also encouraging here that we increased it by 1 percentage on the margin and 11% on total quarter-to-quarter here at 21% compared to 20% last year.

And then the distribution here of our recurring revenues. So we had a 6% organic growth in our subscription base, which is the SaaS fees, the maintenance fees and the really sort of bulk of our income. So the higher blue bar there, really stable. You can see it's a bit down from Q4, but that is also to be expected. We have some Q4 results where a lot of customers are sort of buying bundles and then we recalculate them and see how much they spend on last year. So that's kind of to be expected. You can see that in the chart there. So the organic growth in Q4 was 6% all through the year and then 8% in Q4 and then down to 6% again. And so it's kind of a normal swing there for us.

Also, the transaction-based grew slightly with 3%. So that made up -- so on the mix there of the total, it's 5% for the quarter in organic growth, like I mentioned, a 3% headwind on FX and then 7%, which we added through the acquisitions.

And then just to sum things up, I think it's really encouraging that we are back on track to growing both margins and in absolute terms and the margin also in percentage expansion, fairly good cash flow, good cash conversion. We're steady at the 80% level here. Two really nice additions with Autonet from the Netherlands and Infometric from Sweden. And we're really seeing some rapid AI adoptions across the organization, both internally, but also in the customer application side.

And as you might have seen also in the full report, we have some adoptions, basically, on the numbers in the back there to align it with how the annual report is presented. So that was something that we were asked to do, and we've done so. And we also added some additional disclosures on the back here, among other things, the cash conversion, which I just mentioned there, which is at 80%. So you can see that in the charts at the back of the report.

But all in all, fairly happy with the quarter and the progress from -- across the group here. And also, like I mentioned that we are back on the small incremental improvements in both margins in absolute terms and in terms of efficiency.

And with that, I think we will move over to the questions and answers section.

[Operator Instructions] The next question comes from Predrag Savinovic from DNB Carnegie.

I have a few. I think let's start with your comments around increasing EBITA at a higher rate than sales. Are you expecting to see improving margins now for the rest of the quarters on a year-over-year basis for 2026 based on the growth you see now and the planned cost levels ahead?

Yes, absolutely because that is part of the sort of the overall financial targets that we have is that we want to improve that gradually quarter-over-quarter or I would say, rolling 12 months because there are some seasonalities between the quarters, Q1 a bit lower, Q2, Q3 is a bit stronger usually. So yes, on a full year basis, we are expecting it to increase, but no big numbers, but a few tenths of percentages all in all, so yes, for sure, we are expecting that.

And like I wrote in the report there, it's a combination, of course, the organic growth in sales, but also cost control basically and also that we were sort of starting to see some of the efficiencies of AI and other stuff really filtering through.

Okay. That's very good. Could you discuss a bit more specifically on Enova for Q1 and also for the upcoming Q2 because this volatility in energy prices in the last months, is it reasonable to expect more business and some improving growth there in the short term?

On the sales side there, it's always hard to predict because it is like I say, weather dependent and also really exposed to market conditions in terms of energy prices and so forth. Quite slow start for the first month and then March, of course, with the war there in the Middle East. So gas prices really went off the roof and that added both volatility and the price increasing.

So overall, the quarter was sort of fairly in line with last year. And then it's really hard to predict going forward here in these prices. But what we can say that we have done is that we have worked a lot with the mix of the products and the offering that we have so that we have a lot more stability in the actual sort of earnings from whatever volume may come in that sense. So it's super hard to predict. Usually, Q2 is fairly okay, but I don't know what the weather is going to be like.

Okay. Does AI make your customers move faster? So historically, you've had a lot of tools and services and upgrades, but your clients weren't ready. Is this changing now for you because of the amount of mind share that it captures? And will you be able to roll out more now than you could 3 years ago and not specifically for AI, but that might be a driver for customer adoption of more stuff from your portfolio, what do you think?

I think that we can move a lot faster today and certainly a lot faster than our customers. So our customers, there's a lot of dialogue that they want to feel secure and sure that they will eventually benefit from whatever gains come from AI. But at the same time, they are really, sort of, not moving really fast and want a lot of wait-and-see, and they don't want a big bang because it is their processes.

Yes, over the long run, yes, they will. And we can, for sure, keep up with the customers. And actually, like I said, we can move faster than they can. But at this point, it's a lot of proof of concept here. You need to show the actual value and really talk to them over gradual -- gradually sort of implementing new functionalities rather than any big bangs. So overall, not a lot of sort of push that we can't handle or surge in demand. But everyone is curious and they want to know that we're on top of it and we are.

The next question comes from Daniel Thorsson from ABG Sundal Collier.

Yes. I also have a follow-up question on Enova. And if I'm right, I've heard that you have said that you could export this business into other markets. And have you started to do that? And what's the plans? And is this something we will see in sales in 2026?

Yes, we can, and we have started it. It has been an initiative for over a year now. And the market that we're currently mostly working on is the U.K. So -- but you have to start with selling the software. So we are selling our traditional energy management software to customers in the U.K. And then when you have enough volume and you have all the accreditations that is needed, then you can start selling these value-added components in terms of the grid managing and participate on the balancing market. So yes, we have started since some time back and yes, we've won a few customers in the U.K. on the sort of traditional software side. And then we hope to sort of add the grid balancing services on top of that when volumes and all the permits are there.

Okay. I see. That sounds promising. And then another question on your organic net recruitment plans for 2026, excluding M&A here. I guess that they could be somewhat slower than historically given both the internal productivity you mentioned, but also perhaps a somewhat slower market and lower price increases. Is that a fair assumption?

On the first part of your assumption, yes, it is -- we are really sort of -- a few years ago, it was sort of an autopilot. If someone left, you need to recruit it again. If someone leaves now, then we really sort of challenge that, okay, can we work more efficiently? Can we sort of do that with the resources that we have left? So we are expecting -- and that has basically been flat on the Q1 here. So no organic increase in staff at all for the first quarter, and we're not expecting it to pick up either. So for sure, we are using efficiency gains and new ways of working to be more productive in that sense.

Okay. I see. That makes sense. And then another question on these productivity tools, like all of the AI tools that you work with. Do you see that these providers are raising prices to the extent that it becomes not a problem, but less efficient in terms of replacing one person with all of the different AI tools now coming because of like aggressive price increases? Or is that further out in the future, you think?

I think that's further out if it comes at all. No. So the licenses that we're buying and the token spend that we have, it's not huge at all at this moment. So it's not anywhere near the efficiency gains in terms of productivity.

Okay. I see. And then a final one on the private M&A market. Have you seen to any extent any derating of multiples and expectations given the public valuation multiples?

I think the expectations from our side have certainly derated. So we are absolutely one of the parties here that are trying to really sort of have a fair valuations that you can live with in the long run, which we've always had. So we are hoping that not necessarily paying a lot less than we paid before because we have always been conservative, but hopefully, we can be more successful instead. But the private markets are moving really slow and there's not a lot of deals that have been done.

But we are very active. We are -- we have a lot of discussions with potential sellers here. So yes, of course, we're hoping to add more. And we did 2 really great acquisitions during the first quarter, I think, really added a lot of value here to the group. So yes, we are certainly hoping and that others will sort of follow the example as well.

The next question comes from Thomas Nilsson from Nordea.

I just want to go back to the transaction-based recurring revenue, which grew by 3% in the first quarter. Can you talk about your expectations for this segment for the rest of the year? And also what's included in this line besides Enova?

It has, over the years, been very stable and basically growing in line with the subscription part. So roughly 50% of that volume is ordinary text messaging, mapping, third-party components, point-of-sale solutions, kickbacks and so forth. So 50% of that volume comes from a wide variety of other business units that basically have value-added services that we sell to our customers, which grows fairly in line with the subscription part.

And then there is -- there are 2 bigger parts. One is Enova and the other is Bidtheater, which is programmatic buying. And in that sense, we are having the customers spend on ads going through our books. And that basically follows the sort of usual patterns for ad spending basically throughout the year. So those 2 were a bit -- but they -- in combination, those 2 is 50% of that volume and the other is really spread across at a very stable rate.

Okay. Then as a final question, perhaps if I may. Since AI can both be a changing competitive dynamic, but also an opportunity, what is your overall view of how AI will affect your industry? And what is the most common misconception among investors do you feel?

I think if it's a misconception among the investor community, that's to say that the incumbents like our companies and the fact that we have a lot of legacy code and that is somehow a bad thing. And I think it's quite the opposite. I mean the legacy is a very positive and good thing because legacy is what brought us here. Legacy is what our customers are paying for right now. Legacy is what is working.

So if you have vertical market software, there's like a zero tolerance for failure. Everything has to work. It needs to be very specific. And there is just so much more to a software offering than just the code. So -- and on the other hand, having that legacy, of course, there -- has traditionally been a lot of effort that needs to be put into modernizing that over time.

And here, these tools are really helping companies like Vitec so that the transition and the upgrading of our legacy software has just become so much easier and faster and thereby cheaper as well. So I think that we are in a really sort of good spot here. And again, like I said on some of the previous questions there, we can move a lot faster than our customers at the moment. And it's really adding these components at the pace where the customers want and can adopt it. And that's just being out there and talking to them and proving the value.

The next question comes from Fredrik Nilsson from Redeye.

I want to continue on the track with AI here and connect it to acquisitions. So what questions regarding AI are you asking potential acquisitions? And what kind of answers are you looking for to see that they really fit into your strategy?

I don't think that the questions are necessarily that new because we've always asked questions and looked into the tech stack and see how modern is it? Where are they in terms of, yes, how up to date is the actual product in that sense. And then, of course, disruptions in the potential market. I mean, like I said, we are looking for the market leaders, stable, battle-tested proven companies. Of course, we need to look into, okay, is this -- is there any potential disruption. But we have always looked for software that solves these kind of eternal needs.

I mean will we need housing? Yes. Will we go to the bank? Yes. Will we need health care? Yes. Will we need education? Yes. Do we need to fix the car? Yes. So we're really looking into these niches that themselves, the niche will be there, and there will be a need then for a vertical solution within them. So kind of the same questions. Of course, the speed of the competitors is a bit new.

And of course, we are sort of asking these questions, how do they then -- have they popped up anyone new since the last years and so? And how are they selling? What are their arguments against the customers? And how is -- what is your response to that basically? But roughly the same kind of questions that we have always used actually, but just a bit of new light on them.

I think the key here is that we all look for the eternal needs and really, really need to have software that sort of your business process are dependent on. So that's always been the key. I think that because it's always been a competitive environment all the way through. So very much the same, but then we added a few things like Olle said. But really important software for the businesses. That's the key and always been.

I see. Great. And could you perhaps give us a few examples of initiatives that have been shared over your internal forums that you mentioned?

I can just share a few really encouraging ones. Usually, it's like a 45-minute teams meeting, 2 or 3 business units share very more kind of inspirational. This is how we did it. This is what we succeeded with or this is what we failed with.

I can take an example, for instance, from the auto industry, they have sort of automated the -- if a support ticket comes in, now it's fully automated or support ticket comes into the system, it can really run through all the documentation, all the previous answers and questions around that and then it digs into the software itself, finds out whether or not it is a bug and then it comes up with a solution that we then later quality test, of course, to one of our developers. So that process has really sort of increased the pace.

And a lot of these BUs have already done that, and they showcased it to the others and then they can sort of easily either just get inspiration or they can then later on directly contact this and get hands-on explanation on the bits and pieces of how they did it. But they are very much inspirational -- and then you can sort of deep dive if you want to separately. And that is sort of really picked up the pace.

Another example has been where one business unit invited all the others to sit beside us digitally and see us work for a full day. So this is how the processes have been worked because they are really fully automated. So they got hands on to see how they actually work online with customer support tickets and development and bug fixing and yes, really inspirational.

[Operator Instructions] The next question comes from Erik Larsson from SEB.

I have 2 questions. First, on the subscription revenue. It seems like we -- some type of seasonality has emerged here with a really strong Q4 and then Q1 coming down. So could you just explain the factors here? I mean my understanding is that it's primarily Olyslager, but any general description would be helpful.

Yes, there are basically 2 things there, like I mentioned, Q4, one thing is sort of Olyslager is one of the business units, but there are a few others as well. Customers, they buy bundles throughout the year and that is, of course, accrued throughout the year. And then at year-end, we sort of recalculate and see how is the actual spend.

And the actual spend usually is a lot more because customers are usually trying to lowball and have a bit lower on the spend throughout the year, but that's usually a very positive thing because we're saying, hey, your customers are interacting a lot more with you so that you have spent more. And then we get a little boost there in Q4 from that.

And the other sort of flip side of that, of course, in Q1, we still don't have a lot of churn. It's roughly 1%, 1.5%. But of course, the churn comes in at Q1. So it kind of goes both ways there, going in the separate ways there. So no, we're not concerned that it is sequentially Q4 to Q1 a bit lower. That's just to be expected.

Yes. Yes. Perfect. And then just the second question on the cash flow. You spent around SEK 676 million on acquisitions. So I wanted to understand, is this specifically for Infometric and Autonet, or is it something else in there, too?

It is Autonet and Infometric, the ballpark, and then there is also a small issue there from some of the, yes, earn-outs that comes. But yes, they are absolutely -- the absolute ballparks are those 2.

Okay. Yes, because it looks a bit higher than I had expected. And obviously, I don't have the full picture here, but it implies that these 2 acquisitions have quite the margins. So I'm just curious what multiples did you pay? I guess...

It's both of them.

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

Okay. Thank you all for participating and listening in, and I apologize for the technical hiccup there in the beginning, but I hope you got a good picture of the Vitec and the Q1 and see you in 3 months' time. Bye-bye.

Welcome to Vitec Software Group Q4 Earnings Call 2025. [Operator Instructions]

Now I will hand the conference over to CEO, Olle Backman; and IR, Patrik Fransson. Please go ahead.

Thank you, and a warm welcome to everyone attending this conference call today. My name is Patrik Fransson, Head of Investor Relations. And in the room with me is our CEO, Olle Backman. As always, we will first give you a short overview and then some comments on our year-end report released earlier this morning. And again, as we've done every time before, we will open up for questions after that.

So with that, I will hand over to you, Olle.

Thank you, Patrik, and welcome, everyone, to this presentation. As I said -- Patrik said, we will short with a brief overview of the group as such. This picture, many of you have seen before, but it keeps on evolving all the time. So now we're serving 26,500 customers. These -- all these numbers are per year-end. So by then, we had 47 business units. But as of now, as you've seen from the press releases, we have added another 2 companies to the group. So we're up to 49 BUs at the moment, still 13 countries because they were both in existing countries.

So the pro forma sales is roughly SEK 3.7 billion. And you can see the sales distribution there per market quite evenly distributed through our sort of more dominant home markets. In the later part of the -- during Q4, we added another home market, Poland, which we are very happy about. As you know, the definition of a home market is a country where one of our subsidiaries or business units has its origin. So we have, of course, the 4 Nordic countries, we have the Netherlands, we have Belgium and as of Q4 last year, also Poland to that.

And continuing on the diversification of sales here, it looks pretty much like it has for quite some time. It, of course, varies a little bit in the sales per market. But the point of this picture is that we have a great risk distribution throughout. So we are not dependent on any single country segment or customer for that matter.

And this is a picture showing us on the what we call the responsible growth, which is one of our 4 key areas for sustainability as well. But this is kind of the dual engine of growth. We work with our business units, with the business model, which is, of course, striving to have a high degree of recurring revenues, and we develop them through our decentralized organization and really pushing the organic growth on the one side. And then we like to add acquisitions as we go along if we are lucky to succeed with that.

And speaking of acquisitions, this is a picture for last year and first quarter for -- up until yesterday or so. So we made 2 major acquisitions during 2025. Intergrip in the early parts of the year. It's a nice Dutch company added in January and then in October, during Q4, we added Polish NMG. And then with a strong start of this year, of course, we finished here in January and early February with Dutch Autonet and Swedish Infometric. And of course, these 2 acquisitions, we have worked a lot and hard win during 2025, but we just wanted to wait in the full year numbers as you usually do when you start closing up until the year-end. So they slipped over into 2026. But all 4 of them really nice additions and they fit our criteria very well.

And looking at the sales per vertical, as I mentioned, we now have 49 different business units, but we're roughly active in some 22 different verticals. And you can see, of course, the larger ones where we have more presence, more business units and active in more markets that is energy, property management, health care, finance and the auto and also real estate, they are the 5, 6 biggest industries that we operate in. But as you can see, we're quite agnostic when it comes to new verticals. As long as the companies meet our criteria, we can add another vertical to the picture.

And this is a picture of the various business units, as we've shown before. So this is on a full year basis or when we present it during the quarters, it's on a rolling 12 months basis for you to get a sense of the size and the distribution. And as we've also said a lot of times, this is pretty much what the M&A pipeline looks like in terms of sizes. So the average size of the nice VMS company is still there around EUR 4 million, EUR 5 million. And you can see on the latest 4 acquisitions, I think that also shows roughly that average.

And then going into some of what I call our little superpower within Vitec, and that is sharing knowledge, which keeps on getting better and better with size, of course, and also with our own resources that we can accommodate this and facilitate it. So we have 49 different companies, but they are not competing in any sense. So it is full transparency internally where we can share knowledge, experiences and also failures, of course. And this really fosters both mentality of innovation.

And hopefully, we can move a bit faster ahead because someone in the group has most likely already tried what you are thinking about back home. And then we can share, like I said, really good examples from everything from development to tools we're using, pricing models or whatever it may be. And it is a very appreciated part of being part of a big group as opposed to being just run as an individual company.

Just a short note on AI. I think we mentioned this last time as well. It's basically within these 3 sort of initiatives. We, of course, work with improving our own working environment and our own efficiency and also the kind of business development side of it. And then, of course, on the growth side, where we implement AI into our features and our applications.

So these are the sort of the 3 streams that we are working on, and there are just some examples at the bottom there from some of the business units, but a lot of things are cooking and a lot of these forums, which I mentioned earlier are full of great examples of both tools that we use, but also applications and how to sell them and how to bundle them together with our software.

Then moving over to the sort of main topic for the day, of course, the report. These are the highlights. Like I said, I'm especially proud of all that we are able to grow. Net sales on a total of 6% for the quarter and 9% for the full year. We will get into more on the distribution there where most or absolute ballpark of that growth comes from the subscription-based revenues.

And the EBITDA level was flat compared to last year. But as you remember, we also guided a bit on the Q3 call. Q4 last year was exceptionally strong with a few large hospital projects in Finland running through the books. So that it's really the Q4 2024 is exceptionally strong. So with that said, I'm quite pleased that we were able to basically match that for this quarter as well.

And if you can see on the full year, total growth of 9% and roughly 2% in operational margin, 6% on the net profit, increase. It's okay. It's not bad. But as I also wrote in my comments here on the Q4 report, I'm really pleased with the growth, but we have a tradition and also an objective to, of course, grow our profits faster than we grow our top line. And that has not been the case for 2025. So in terms of efficiency, we -- there is more to do for sure, and we are working on that a lot.

Other than that, when you dive into the numbers, it's not perhaps shown on this page, particularly, but one of the big items in the profit and loss statements are the reversal of earn-outs, roughly SEK 200 million or so for the full year. And just a short comment, it doesn't affect the net profit, it doesn't affect the cash flow. It's 2 line items that are identical. It's just the accounting rules that makes that we have to put like that instead of having it as a net. But it is a proof that our sort of pricing model when it comes to acquisitions really work.

We are prudent and we say that, okay, fantastic if the acquired company has a really promising future and then the sellers want to have a part of that. We say, fine, I'll pay for it when I see it. So these -- all the sort of subsequent payments of earn-outs is connected to growth in profits. And if that sort of really high targets aren't met, then of course, we're not paying it.

So in this case, expectations were from the seller's side that we will really reach overperforming. But in this case, they haven't overperformed. They have performed well. It's going according to plan. I mean you can see that in the numbers.

But it's just a way of kind of gaping the bridge between a buyer and a seller, but also sharing the risk. And in this case, we have been able to then reverse that risk in the sense that it's okay. Profit is okay, but it's not overperformed. So hence, we don't pay the earn-outs. So I think that's a good point to just highlight.

On top of that, of course, you can see that in the numbers, we had a bit of a currency headwind throughout the year, nearly 2% on the full year and then 3% on the quarter. And given that we have 75% of both sales and profits in other than Swedish krona, of course, it hits both the profit and the net sales. But currencies go up and down, so not much we can do about that.

Another strong thing for the quarter was the cash flow, both for the quarter and for the full year. So cash conversion was good, and we really worked with the working capital there and the cash collection has been a sort of priority throughout the year. So we're very pleased about that. And cash flow for Vitec, as you know, you should really look at the full 12 months because we have Q1 being our absolute strongest cash flow quarter where we collect most of our prepayments.

So you really need to look at this on a 12-month basis. But -- so if you look at the full 2025, if we take the operational cash flow and then we adjust it for the activations, of course, and then the leasing payments, which I think is the prudent way. It's still an 85% cash conversion to EBIT or operating profit, which is a fairly good number.

And just moving over to the sales per quarter. As you can see, it's a bit up and down. But overall, according to plan, we will get into the details of the split of organic and acquired in pages to come. The EBITA profit, same there, strong finish, but here, you can really see the exceptionally strong Q4 from last year in that sense.

And then cash EBIT, which is our internal sort of metric, which is basically the operating profit, but netted away from any activations and amortization and depreciation on the intangibles. So this is really the cash -- close to the cash generating. And here, I'm pleased with the sequential increasing. If you can see throughout all of 2025, we had -- like I said, we had an exceptional 2024, and then we started off on a bit lower scale, but then we gradually Q2, Q3 and now Q4, almost linear sort of increased the profits, which is what we aim to do.

And then moving over to the split here of the recurring revenues. And here, you can see the bulk and the basis for everything that's a subscription-based revenues. It grew incredibly well, 8% on the quarter. And you can see in the other quarters, it's been 6%, 6%, 6% and then 8%. It is a bit of a Q4 effect where we have some of the reconciliations of our subscriptions take part in the later part of the year. So it's always a little boost there.

But if you look at the full year, it's just over 6%, which is a really good number. And then in the bottom there, you can see the transaction base, which is, of course, varied a lot throughout the year, and we have commented that in all of the other quarterly calls. And then basically no change from that. So there's nothing sort of exceptional for the Q4 compared to the others throughout the year.

And then just finishing off before the Q&A session here. I think it was a really good cash EBIT margin expansion, consecutive improvements throughout the year, a really strong cash flow. And of course, we are very pleased that we were able to finish off 3 acquisitions in the last 4 months now, now 1 during Q4, NMG in Poland and then the 2 with the start of this year. So a lot of work has been put into that and finally sort of materialized.

So with that, I think we will move over to questions.

[Operator Instructions] The next question comes from Predrag Savinovic from DNB Carnegie.

Could you start by elaborating on the transactional revenues, which show much more of a stabilization now in the fourth quarter, discuss maybe on the differences in year-over-year growth this quarter compared to the past? And if you can discuss these comparables going into the first quarter, if we can expect further stabilization for the start of this year?

Well, yet again, on the sort of half of the transaction-based revenues are spread out through almost all of the other business units, and that is a very stable number. And then there is another half which comes from Enova, which is, of course, like we discussed many times, the grid balancing market. The grid balancing market has been more stable, but will it stay stable? It's very hard to predict. I mean we have now 1 month into this year, and we see that it is still roughly more stable than during 2024. But if that is going to continue, like I said, I can't predict the weather in the Netherlands, unfortunately. So -- but for now, it looks more stable than last year. So yes.

Okay. That's very good. And then Q4 is generally renewal season for you, and we're already in February. So you should have quite some good visibility on the growth pace in the recurring revenues for '26. And given the uncertain times we are in now, would you consider giving us some indication of how the recurring revenue growth organically is progressing for Q1? Maybe without saying numbers, but maybe you can add in line with '25 or in line with the fourth quarter or so on.

What we can say is, of course, that the pricing mechanism within the growth is roughly 1% lower than last year. just given that the indexes that fuel that is roughly 1% lower. Churns are roughly the same as last year, around 1%. So we don't put a specific guidance. But with that in mind, I mean we are expecting 1% less from pricing, but still a few percentages up. I think the KPIs will sort of come in at roughly between 2% and 3%. Last year, they were between 3% and 4%.

Okay. That's very good. So then in total, maybe some upsell and volume...

Yes, that has been...

Slightly lower than the pace for.

Yes. All things equal, perhaps 1 percentage down just from the pricing, if we can keep up the upsell.

Okay. That's very clear. And then Olle, you stated you were not satisfied with the EBIT margin for the full year and gradually expect it to reach at least 20%. What is the time frame? And what kind of margin phasing do you expect for the coming year?

We actually hit the 20% mark, which is on operating profit, but it's also part of that goal is to increase continuous improvements. That's all what Vitec is all about, grinding, grinding and gradually improving. And in that case, we didn't succeed during last year. So what I'm looking forward to and what we are pushing our business units towards, that's both through, of course, organic growth, but also through efficiencies to gradually improve. No big numbers, but take a few steps every quarter to improve the margins. That's what we aim for.

The next question comes from Erik Larsson from SEB.

I had a question on sentiment. So obviously, looking at public markets, it's been clearly negative sentiment here over the past quarters and especially recently here. But at the same time, I have the impression that the general interest to acquire companies in your space in the private market has remained at a high level. So for you and your competitors being more operationally active, it doesn't really appear you see the same risks as maybe public investors do. So yes, just wanted to hear your thoughts about that sort of disparity and perception.

No, it's true that -- it's not necessarily true that we see -- don't see any risk. I mean, we probably see parts of it, but we haven't seen it operationally. We can't see that our markets are sort of fading away that we are increasing the competition. We have always competition for sure. But we're not worse off than anyone else. We're using the same tools. We have the same talented people. So we can work with all of that as well. And on top of that, we have the infrastructure, we have the knowledge of the industries. We have the support staff, which know our customers. We have their confidence since many years. So it's all down to the brand promise to be able to rely on today and tomorrow.

And if you sum all of that, you can do the math. I mean we can count on these cash flows. We can make a fair assumption of the predictions. And the risks or the fears that are out there, we can't really see them yet and hence, the private market is still there. It doesn't move up as fast as the public market either, and it certainly hasn't moved down.

But of course, over time, if there is a huge downturn, which has been here, we would expect it to materialize also in the private market because, of course, for some of these companies, it is a potential sort of next step to go public.

So of course, we're looking forward to seeing some of a slight sort of more modest pricings or what we could call it in the private market. But for now, the interest is still there. All these acquisitions we have done have been highly competitive. So there's lots of people that are still very interested in these companies and see a great potential in them.

Great. I just had another question on your most recent acquisition here of Infometric. So could you just give any indication in terms of the revenue split, subscription, transaction services, et cetera?

Yes, I can do that a bit. And I can see it's roughly 45% -- 40% to 45% is the recurring revenue rate as we go on. And they have a highly interesting model, which we really like. So it's -- it is a SaaS company. They have their own software, which looks like all the other companies. But what they have is they also sell projects or they sell products. These are third-party component products, so not of our own.

So we're just buying them on the open market, and we bundle it together either in projects or in product sales, but the conversion ratio from selling the products over to SaaS and software is close to 100%. So for every piece of hardware that gets installed because you need the meters out there. So this is IMD, so individual metering data for electricity and heating the water.

So of course, you need the infrastructure out there. So currently, I think the conversion or the installed base is just over 20% in the market. So for a foreseeable future, we can sort of fuel our recurring revenues with doing these projects and converting them over and having the long-term relationship that you have with your subscription customers. So roughly 45% is recurring revenue today on the software and then the rest is -- I think it's 2/3 are our own projects and 1/3 is pure product sales where typically other electrical contractors are buying the products from us.

The next question comes from Daniel Thorsson from ABG Sundal Collier.

I follow up on Predrag's last question there on the margin journey ahead. And how do you view your organic net recruitment pace going forward given increased productivity among software engineers, I guess you can become more efficient with AI, as you showed in the graph as well or in the slide as well and need less developers. Is that the way we should see it or...

Like I said, we haven't heard from anyone in the industry and certainly not for ourselves that this has yet led to any sort of reduction in staff. But what we have been is a lot more cautious about recruiting when you have people going to retirement or people leave for any other reasons, we really question, okay, can we shift around staff? Can we do things more with that efficiency. So yes, we are hoping for that.

We have seen some of it, but it hasn't materialized super high yet. But for sure, we are sort of expecting like any other technological shift that we have been through for our last 40 years that we will become more efficient. But in software, also in the decades and decades of improvement, most of that improvements end up with the customer. They get more bang for the buck. They get better software, they get more services, they get better features. So a lot of the productivity ends up at the customer side. But for sure, we are expecting productivity gains, yes.

And following up on that one again. On that slide, you showed both growth levers from AI and cost reductions. Do you think you will see a greater effect from AI use cases mainly on costs or on revenues a few years out?

I think for now, we are mostly seeing it in actually products and in increased sort of pace when it comes to transforming legacy software, for instance, and things like that. So in that case, we're still seeing more on the revenue side. than on the cost side. Because the difference between Vitec or any other VMS company and the horizontal is that we have 49 development departments. I have 49 of everything because that's the decentralized model, and that is working super well for us. So I think VMS companies, yes, we will have some efficiency in the sense that we will become more productive. And that should more be on the revenue side actually than on the cost side.

Okay. I see. That's helpful. And then finally, which company or companies was the reversed earn-out here in Q4 linked to?

It's actually 5 companies in that sort of bucket because we do the -- it's based on the year-end numbers. So we have -- basically, if you take the recent acquisitions, both, the absolute latest one because that's too early, but acquisitions from the last 2, 3 years.

The next question comes from Fredrik Nilsson from Redeye.

I want to continue a bit on the discussion of AI from another perspective perhaps. I mean you have exposure to a lot of different industries, obviously. But if we focus on the most tech savvy ones, what's the feedback you currently get from those regarding your product offering? Are they eager for new AI features, for example?

A lot of our customers or nearly all of them want to discuss. And yet again, here it is that they should be able to rely on us to sort of -- that they can benefit from the AI functionality. And that's the beauty when you have a standardized software because we develop features which is based on the industry's total need. So they might say, okay, I have this need, but then we say, yes, but this and this is in our pipeline and they say, great. So it's a benefit of the standardized software.

But at the same time, they really want to hear that, okay, we're on it, we're working on it and we have it in the pipeline, and we can also show them at present with some really nice features. But a lot of them are super conservative and say, yes, we want all of that, but please don't change anything is sort of the next sentence. So they are really sort of more or less reluctant to do any big bang changes because this is one of the moats around vertical market software is that it is so embedded into the customers' processes.

So it's a very slow-moving animal here. So yes, they want to benefit, but they don't want to change anything at the same time. So it's -- you will have to do this very gradually. But the big thing here is -- or the important thing is that they feel that they can benefit from these improvements over time. So a lot of them are not in a hurry.

Great. That's interesting. And regarding other external costs, they were up almost 20% compared to the same quarter last year, which already was at a quite high level. Is that due to a different cost mix in acquired companies perhaps? Or am I missing something else?

No, you are right about that. For instance, NMG in Poland, where it is sort of a bit market practice and market standard that a lot of the -- what we call employees, but they are still on contractors. So it is a bit different mix in that sense, yes, from the acquired companies.

The next question comes from Thomas Nilsson from Nordea.

Congratulations on a strong report. I just want to ask some of these obvious questions that I get from investors all the time. Do you at Vitec see any risk of seat compression going forward due to AI, that is customers are becoming more efficient, then they may also hold back on recruiting, resulting in fewer hires and fewer software seat subscriptions. What do you answer when investors ask you that?

Well, in the long run, yes, that is a possible development. And that is why we have been working for the past 3 years, I think, with -- in the sectors where we see that. It's not across the line for sure. And like I mentioned, we have less than 1% churn still this year. So it's not something that we see, but it is a potential future development.

So we have been working with pricing models, more sort of value-based pricing because if our customers become more efficient through the software that we are providing, we are adding a great value for them. And really good if they can benefit from being more efficient, but we shouldn't get punished for it. So we must sort of work with the business models and the pricing models. And this is yet again, not exclusively for Vitec, that is across every software company.

We're not seeing it as of yet, seat compression, no. But it has been on our radar for many years because it is a potential development going forward. So the answer to that is looking into the pricing model and adding more value to our customers. And of course, we should be remunerated for adding value.

Thomas, Patrik here, just short. I think -- also, I think it's important, this is nothing new. I mean digitalization has always been about improving and do more with less people. So that's been ongoing for like 40 to 50 years. That's the whole thing about utilization. So that's nothing new.

Yes, the pace might increase for sure. But it's not a new thing to sort of -- for us to work on. It's always been there. So business as usual in that sense. It's always been the case. Will the pace increase? Probably. And then like Olle said, that's how we're thinking of it and according to pricing models.

The next question comes from Viktor Lindstrom from SP1 Meter.

Just one question for me here. Given the current market dynamics, would you say that you have changed your acquisition criteria once evaluating new M&A targets?

No, not changed it. I think that is one of the big things here that we are very consistent when we look for the criteria. Of course, pricing we always try to pay a fair value within what we think is sort of possible. That's why also the pace has been a bit less. So we have tried just as hard. We have looked at just as many companies, but we have just lost more because we are still quite prudent when it comes to pricing.

And of course, if -- like we said initially, the downturn in public valuations, if that should impact on the private market, yes, if it is in the long run because some of them have the public market as sort of a potential next step. So yes, we would look forward to that.

But as of now, like I mentioned, there are a lot of nice companies out there. There is still high competition for these targets. And as long as we can sort of do our calculations and if it is within our criteria and our valuation models, we will try to continue.

The next question comes from Daniel Lindkvist from Danske Bank.

So just a follow-up on Dan and Fredrik's questions earlier on. Basically, with the NMG, is there a seasonality to be taken into account? I mean it seems like it added quite some in Q4 given the expected size of the acquisition and also what you report if they would have been in the numbers for the full year?

Well, first of all, NMG is growing quite extensively. It is a really growth case. That's what we expected. And then the model there, their customers are the grid owners in Poland. there are only 7 potential customers. I think we do business with 6 out of 7. And the way these models work, you sign multiple year contracts where you do a lot of development.

So there is a high degree of services. And all that services is basically CapEx for our customers, and then that translates over into recurring revenue. Usually 15%, 20% of that services then fuels next year's recurring revenue. So NMG is growing fast, and they are doing a tremendous job. So we are expecting that to continue at least for a few years because they have lots of interesting prospects in the pipeline.

Okay. Great. And then just with -- I mean, now I'm trying to get my model to work here. So basically, on the cost of goods sold and other external expenses in relation to the NMG subscription-based recurring revenues, service revenues and other revenues. Is there something to take into account with the gross margins? Are the subscription-based recurring revenues on lower gross margins than we used to? Or are the third party...

No, the subscription for NMG, that's pure software revenue. So it is equivalent to the others. It's 90-plus percent gross margin on the subscription part. Then the services is, of course, that's ours that we put in.

Yes. And there's no split of income from them in any way. So that's also a high gross margin business. So then it's in other revenues then that's the third-party part of their business ends up.

No, the NMG doesn't have a lot of third party. They either have services or they have recurring revenue, then that's what they sell. They don't sell any hardware. They don't sell any third-party components.

Okay. And then on the -- just on the other external expenses, should I read that as that the costs are ending up there instead of in personnel expenses then or instead of as in cost of goods in personnel expenses. Great. Then nothing further from my side.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you all for participating and the questions. And then just summing up, I think we posted a decent quarter. We were happy with the growth. We could have done better on the margins, although they were okay and cash flow-wise, it was really strong. So that was a positive note. And of course, we managed to close these acquisitions that we are super happy with. So that would be all for now for us. So thank you for listening, and take care.

Welcome to Vitec Software Group Q3 2025 Earnings Call. [Operator Instructions] Now I will hand the conference over to CEO, Olle Backman; and IR, Patrik Fransson. Please go ahead.

Thank you, and [indiscernible] Head of Investor Relations at Vitec Software Group, and with me is our CEO, Olle Backman. In the call, we will first give a short overview of Vitec as always, and followed by comments on the report we released earlier this morning. And after the presentation, we will open up for questions. So with that, I will hand over to you, Olle.

Thank you, Patrik, and welcome, everyone. Okay. Let's start off, as usual, with a short overview of the Vitec Group. By now, you know this picture. So it's -- the dots here represent where we have our sort of feet on the ground, where we have our own offices, which is all in all in 12 different countries. But we have sales actually in over 50 countries by now. So that's a bit more. We sell our mission-critical software to nearly 26,000 business-to-business customers. Pro forma sales is up to SEK 3.6 billion. And to my help, I have nearly 1,680 colleagues around the world. And it says here 46 business units, but as of October, we're actually 47 with the latest acquisition.

Moving over just to show the diversification of sales, which is also a great strength of ours so that you can see that we are not dependent on any single country or any single customer or for that matter. So we have a great risk distribution in this. And you can see also that the distribution throughout the markets is fairly even by now. And then talking about growth, how we work with that. We have our sort of dual engine representing this. So we are the business units that work with market leaders in each of their markets, usually a high percentage of recurring revenues. So they develop this through our decentralized organization. So that fuels the organic growth. And then, of course, we have the acquired growth, which is the acquisitions, which we then fuel this with.

Looking at last year, we did a record of 7 acquisitions heavily in the last -- later part of the year. You can see that they come in all shapes and sizes and also in a variety of countries, and we opened up a new market last year in Belgium. So far this year, we have made 2 acquisitions, one in the Netherlands and also opening up a new country this year with Poland, welcoming NMG here just after the quarter closed in early October.

And sales by vertical, that is one -- another way of looking at this. So we have nearly 46 business units, but we operate through 22 different verticals. And you can see that the bubbles here are the sizes in terms of volume there. So property management, energy, health care, auto and finance are the biggest ones. We also show a picture of the various business units with the LTM numbers on the sales and also the share of the recurring revenue part. And you can see here also, this is the distribution here, some bigger, some a bit smaller, and that is basically also how our M&A market looks like. So by now, Vitec with all our 47 business units, it's a blueprint of the market.

And when we work with these business units, one of the great strengths of belonging to a group is the sharing of knowledge across the group. So we have a common culture. We have a sharing concept, which we call where we have forums. We have, I think, nearly 12 different forums where we have our best practice sharing. And this is a very powerful tool because all of these 47 business units, although they operate in different markets, they are very much alike when it comes to business models, when it comes to technology, when it comes to utilizing technology and different types of tools, of course, AI tools for that matter. So within these sharing forums, we have a great opportunity to cross-fertilize good ideas to come.

And just a short note on AI. I thought I'd mentioned that I wrote about it also in the report here. We have different ways of looking at this more from an internal perspective, of course, improving our ways of working, efficiency, quality, risk mitigation for that matter. And then on the right-hand side, we have a growth perspective, which is the more external perspective where we embed AI functionality in our applications, which we sell to our customers. So that gives us both us and the customers a competitive advantage. It gives us great scalability and also new revenue streams to come with that.

And below there, we have some examples from some of the business units from the internal perspective, a lot of it is around both efficiency in coding, of course, with the tools, but also in customer success and customer support. And the same goes for the external perspective when we have our customer applications, which, for instance, in Vitec Energy, the AI models that we use for energy forecasting, which we sell to our customers. In the real estate agents business, we have a powerful tool there to help the real estate agents being more efficient in their daily work. And also in Appva, which is in the elderly care, where we help our customers to automate some of the regulatory data that they need to report and adhere to. And these are just some of the many, many examples that we have across the room. But also, like I mentioned in the report, this is more of an ongoing evolution. This is something that we have been doing for a long time. And with every new technology shift, we use it, of course, and see how we can work with it and to our advantage and also to the advantage of our customers.

Then moving over to the third quarter report. We have the highlights here. Total sales, net sales was up 6%, 10% on the full year for the first 9 months. Recurring revenue share is very high, as always, 90% here. Our EBITDA was slightly down 5%. But the cash EBIT, which is something that we've been talking in these con calls throughout the year, so that's an EBIT margin net of any capitalization or amortization. So it's very close to the cash generating, and that's also the internal KPI metric that we use in our business units that was up 10%. So of course, the difference is there that we write off some of the intangibles quite heavily. So that's the difference between the EBITDA and the cash EBIT. So cash EBIT is really the day-to-day operations and how that is tagging along. So 10% up there for the quarter, 5% on the total.

And also something I wrote in the report there this quarter, again, we have Enova, our Dutch business unit, which was down nearly SEK 50 million compared to the same quarter last year and with a gross margin loss there of SEK 11 million compared to the last year. That's something we also wrote about in the Q2 report where the numbers were even greater. So it's going in the right direction in that sense. And we also have done a lot of measures in the product development and also in the business development there to mitigate the ups and the downs there. But we are exposed there to the market conditions of the balancing market. But nevertheless, Enova is still doing great from a business unit perspective, but they also operate in quite a volatile market, but we will get back to that.

Cash flow, quite according to plan and according to the seasonality pattern that we've seen throughout the years. You must remember, we basically have all our cash flows in the first quarter, which is a great thing with this recurring revenue models. So we generate all the cash in Q1 and then we are basically quite flattish throughout the rest of the year. So this is totally in line with expectations. And if you see the -- you should really look at the 9-month figure there, which is up by SEK 60 million roughly from operations.

Net sales, we talked about that roughly up 6%, like I mentioned, for the quarter. The EBITDA result is by margin, a bit sequentially up, but compared to last year, it's slightly down by 5%. And the cash EBIT, which I mentioned earlier, there, you can see also the sequential improvements throughout the year from Q1 to Q2 now to Q3, but of course, compared to last year. We're also up with 10%, like I mentioned, for the quarter, which is quite good in this macro environment and despite that we had that SEK 11 million less of gross margin from Enova than we had last year. So overall, fairly happy with the development from the cash EBIT perspective, dragging along quite nicely.

I also mentioned in the report there that we did a bit of a reminder that last year was an exceptionally strong Q4 with both -- the 5 acquisitions that came in, in Q2 and Q4, which also, of course, contributed highly to the growth, but also the fact that we had a great tailwind from a better general economy, and we had 3 large projects, hospital projects, which finalized. They were 3-year long projects, which came through last year. So you can see that if you look in the Q4 report for last year, you can see a very high numbers on license, other sales and services for that quarter. And like I wrote in the report, we have a stable environment today. Nothing really is happening not on the upside, but also not on the downside. So we are expecting a bit of a more flattish development in that sense for Q4. And by flattish, I mean, compared to where we are at this point. So it's not flat against last year, which was all in all, a huge record quarter.

Then moving on to something new. We, from this report, start to report on the quarterly basis, the organic and the inorganic growth. There are lots of more numbers in the actual report. But in this presentation, I just highlighted here the subscription part, which is the absolute bulk and the SaaS fees and the maintenance fees, they were up 6% during the quarter organically, whereas the transaction-based was down 20%. And this is, of course, the SEK 50 million, which I referred to for Enova is behind that loss.

So I hope that you will be able to dig into these details. I still think that Vitec is a really long-term company. You should really look at the LTM numbers and the long-term perspective of everything we do. But of course, there are quarterly things to look at. So just summing up steady operational improvements for the quarter. Enova, still a bit of a soft market there, but they are doing quite okay from a profit perspective. And in October, of course, we added the acquisition of NGM, which we were very happy with and look forward to reporting them in the Q4.

So with that, I will hand over to the question-and-answer session.

[Operator Instructions] The next question comes from Predrag Savinovic from Carnegie.

First off, I'm curious if you could quantify the revenue and EBITDA contributions from the projects that you list benefited the fourth quarter last year...

Okay. Sorry. Now we hear you, Predrag.

Okay. I'll repeat myself. So first off, I wanted to ask if you could quantify the revenue and EBITDA contributions from the projects that you list benefited the fourth quarter last year?

[indiscernible] But if you look at the Q4, especially if you compare Q3 '24 to Q4 '24 and then Q1 again, you can see that there is an absolute increase in those line items. So other revenues, maintenance -- sorry, other revenues, services and license. So there are quite significant changes there. And as you know, both licenses and service revenues are very high-margin business because now we have all the resources, we work with our own staff. So I think you can look -- at if you compare those 3 quarters, you will see that Q4 last year really stood out.

Okay. That makes sense. And then on Enova, I mean, you discussed it already now and a bit in the report, but if you could discuss in terms of when you have large volume reductions and when you have large volume upgrades, what are typically the reasons for this? How much of that is relative to the market? How much of that is relative to your own performance? And yes, it looks like there's been some exceptional quarters. What could be reasonable to expect for the coming one now for the fourth?

Absolutely. these 2 quarters have been really exceptional. But I would say, first of all, 100% of it is due to factors that we basically don't control over. So the market volume and market pricing. So that depends on the production volume in the market at the moment. So where the big power plants running at full speed? Or is it more wind and solar power, for instance, and batteries. And we basically just place bids for our customers on their behalf. And we win some, we lose some. And so it's totally aftermarket conditions. So it's not our own sort of performance in any way. The software that Enova sells, of course, that's a pure SaaS model underneath there, roughly EUR 4 million a year. So that's progressing according to plan and the rest is a volatile market.

But like I mentioned, we have done a lot of business development really looking into also pricing models and how we can expand everything to, of course, give our customers the best possible service, but also to, if possible, make that a bit more stable. And what we have seen throughout this year, so both Q1, Q2, Q3, it's a lot less volatile. So it was really yet again [ 2024 ] that had it really peaks and ups and downs. So it has been a lot more or a lot less volatile this year. But again, could something like that happen again? Of course, it could because there are market conditions there that is totally sort of out of our hands. But also as we grow and become bigger, I think this will be slightly diluted over time. But like I said, Enova is a bit of a one-off within the group. It's still a very nice company, like I said, and they are really contributing to both volumes and earnings even in that volatile market.

Okay. Very good. And thank you also for the increased disclosure on transactional and recurring and the organic growth rates. I think that's very good. And in terms of transactional streams, apart from just Enova, based on the growth rates you show here and the history, it looks more normalized when we look at Enova and your other transactional streams. Is that a fair assessment that, yes, we should probably not expect the same type of year-over-year effects in the coming quarters then also based on what you just said, Olle?

Yes, that's what we expect. I mean, of course, the caveat there that should some extreme market conditions appear for Enova. But for sure, in the transactional part, roughly 50% of it is Enova and 50% is spread out through all the other 45%, which is a lot more stable. I mean that's a typical SMS messages when you have an appointment, for instance, and things like that. So that is -- that's a true and fair assessment that you made there.

Okay. Very good. And just a final one in terms of upgrades to code and new technologies, which you discussed AI more here in the report. It's good to see you on the ball. I know it's early days, but is there any way to quantify the benefits you can get either in some of the divisions? You mentioned energy forecasting, management and so on or even better if you could reason around OpEx relative to sales a few years in the future?

We don't have any numbers on that yet. Like I said, it's still quite early days. And I think both we and a lot of other IT companies, I don't think that the usage of AI, for instance, in development would necessarily mean any reduction in costs. It's more that we will be more efficient. We will produce more with that in terms of coding. And then of course, the customer success and the customer service part, we will become more efficient. Also our customers will become more efficient. And over the years, all of these technology changes have usually sort of been to the benefit of the customers. And of course, some of that will spill over to us. But no, I don't have any specific number, but we do see productivity gains, yes, but hard to put a number on them.

The next question comes from Christian Binder from Redeye.

I want to talk a little bit about your most recent acquisition in Poland. Can you talk a little bit more about that market in terms of potential competing acquirers and potential acquisition targets? How does it kind of compare to the other markets where you're active in?

Of course, when we open up a new market for ourselves like we did in Poland, we have looked at Poland for quite a few years and looked at a number of companies there, but sort of haven't been able to close. We're very happy to be able to close the NMG. And for NMG itself, they have a great market position. They have 5 out of 7 of the grid owners in Poland as their customers and the number of meters that they are collecting data from, they collect, of course, from all types of meters, and that's one of their great benefits. But the penetration of so-called smart metering in Poland is roughly, I think, 35%, 40% and there is a law that says that I think it's by 2030 or 2031, that should be up to 100%. Of course, then even more data will be collected, and they are also fueling a new data hub that will be implemented in Poland.

So there's lots of things happening in that space in Poland just for NMG. So we really look forward to NMG to continue to grow. And then, of course, when we enter into a market, we get a lot more attention. So we see that already now in terms of the M&A pipeline sort of filling up more with Polish companies. But we have a good pipeline all in all. But of course, we get more attention in a country when we are successful there.

Got it. And you previously remarked that due to increasing competition, at least in some regions, kind of acquisition multiples have sorted up over the last, let's say, 10 years. It's my impression that Poland may be a market where there is somewhat less competition. Do you think that kind of acquisition multiples there will be a little bit lower than in your kind of previous core markets? Or do you think it's quite similar?

Well, for now, they are a bit lower, in the Polish market than they are, for instance, in the Nordic and the Netherlands, probably due to, like you mentioned, the competition. So yes, they are still a bit lower, the multiples in Poland. So of course, we try to benefit from that.

The next question comes from Daniel Thorsson from ABG Sundal Collier.

A follow-up here on the Q4 comment that you said. You said flattish earnings versus Q3. Is that on EBITDA or cash EBIT? And was that statement including the NMG contribution or not?

No, the flattish towards the -- the Q3 -- and then when I meant that, that is according to the cash EBIT because that's what we talk about when it comes to internal operations.

Okay. I lost a little bit of the response there. Flattish cash EBIT, you said quarter-over-quarter. Was it including NMG contribution? Or will that be on top of it?

No, that is compared excluding the acquisitions.

Okay. Clear. And then on OpEx in the quarter, Q3 was slightly lower than I thought at least. Have you made any structural actions in OpEx in Q3 that we should have in mind ahead driven by increased efficiency or lower other OpEx, for example?

Well, first of all, we haven't really hired anyone. I think we talked about that early in the year. Of course, we have not reduced headcount per se. But of course, we have a staff turnover. And when someone leaves, of course, now we really question do we really need to replace them here and now? Or can we think of being both efficiencies or other ways of working. So I think that OpEx sort of compared to volume has sort of will gradually go down. And also, of course, the part of the OpEx is some of the COGS, of course, that is the bought energy, for instance, for Enova with lower volumes on subscription that also lowers the cost, of course.

That's clear. And then a question on the new good table here on organic growth in subscription-based recurring revenue. We clearly see that you have done around 6% organic growth during this year, which is a number you have talked about over many, many years, but that's a sustainable level longer term. Looking into 2026, moving parts like price increases, upselling potential, how do -- how should we think about this 6% organic growth in subscription-based recurring revenues? Is that a fair assumption for '26 or anything to flag here?

Well, to flag, of course, in those 6%, roughly 3% is due to pricing and then the rest is upsell and more selling of that. And we are expecting the pricing component to go down because for good or bad, a lot of our subscription revenues are connected to some sort of CPI which makes it very mechanical, the price increasing. And of course, at least if you take Sweden, Finland, partially Denmark, CPIs are trending downwards from last year. So there might be 1 or 2 percentage down on the pricing component. But of course, if we start to get some tailwind from the macro environment, then the upselling part could increase. And so that has been sort of the case throughout the years. So on average, I think we have been around 5%, 6%. And then in higher inflation markets, it's more price and less upsell and vice versa.

Very clear. Final question on M&A headroom. You stated 1.7x net debt to EBITDA here in Q3. We know that you have some earn-outs going out in the coming 12 months. How large do you view your financial headroom for acquisitions over the coming 4 quarters or so?

We have always said that we are comfortable and we can go up slightly on the EBITDA to net debt. So the 1.7 there, if we are at 2 or 2.5, I will still sleep very well at night with our recurring revenue model behind us. So in that sense, I still think that we have a bit over SEK 1 billion, SEK 1.5 billion easily in that sense. But you also must remember that we buy profitable companies. So that should add some as well. So no, I think we have enough firepower for now and for the near future anyway.

Excellent, that's very clear and thanks for increased transparency in the report as well.

The next question comes from Thomas Nilsson from Nordea.

When it comes to AI, could you perhaps talk a bit about the fear that if AI makes your customers more efficient, would they then be buying fewer seats? That's one concern that's in the market right now? And also, I think you perhaps answered this question before, like how much of a headwind will the 3 projects in Q4 [ 2024 ] make in the coming quarter?

Yes. I take the AI question there. Of course, there is a risk for us and everyone in the IT industry that if our customers become more efficient and we have a pure pay per seat model, we might get hit by that on the margin-wise there. But that's also why we have for the last, I would say, 2, 3 years, really thinking and experimenting and finding out other pricing models that correspond to the value that we actually create. It's usually a mix. So we're not going fully over to, let's say, for instance, in the financial industry, such as a lot of you guys are in, there's assets under management, that's one thing or you can have the number of transactions or if you are in towards the insurance companies, number of policies or if you're in the health care regions, number of inhabitants and if you are in real estate, you have by square meter instead.

So there are lots of different components that we could add that corresponds to the value because it's all down to what value are we creating for our customers, and we should be sort of fairly compensated for that. So that's something that we have really worked with for years already. So that was before any AI hype because software in a sense that should make our customers more efficient, and that has always been the case.

The next question comes from Daniel Lindkvist from Danske Bank.

So just one quick question then on the same subject that we had from ABG earlier on. On the contingent considerations, how much is related to Enova and how is the setup? When are those evaluated, if you can just give some comment on that?

Well, we have 2 years left of the earn-out period for Enova. So given the volatility of the business itself, we entered into an agreement with the sellers, and they thought it was only fair because from their perspective, they could not sort of guarantee us the volumes as well. So we have a 4-year long earn-out for Enova. We are just halfway into that. So we will, at the end of the day, have paid a fair price for Enova given its performance. I can't go into the details of that because that's a bit sort of sensitive information, but we are only halfway into the earn-out period there.

Okay. So there's nothing due within the 1-year period and everything is related to the SEK 350 million between 1 and 3 years out?

We have estimated roughly SEK 300 million for next year for all of the acquisitions in total. So Enova is, of course, included in that total. But there are more companies in there, so to speak.

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

Okay. I think that was all of the questions for now. But thank you for now, but thank you for listening in, and I hope that you have found the report and the increased disclosure helpful. So thanks for listening.

Welcome to Vitec Software Group Q2 2025 Report Presentation. [Operator Instructions]

Now I will hand the conference over to CEO, Olle Backman and IR, Patrik Fransson. Please go ahead.

Thank you, and a warm welcome to today's conference call. I am Patrik Fransson, Head of Investor Relations, here at, Vitec Software Group. And with me to my left is our CEO, Olle Backman.

As usual, in this call, we will cover the report released earlier today and also give a short overview of Vitec. And again, as always, we will open up for questions after the presentation.

So, with that, I hand over to you, Olle.

Thank you, Patrik, and welcome all to this conference call. I will start, as always, with a short overview of the Vitec Software Group. And as you know, I always talk from the customer perspective first. So we are serving the 26,000 business-to-business customers. We do that from a decentralized organization through 46 business units. We are today present in -- with our feet on the ground in 12 countries, but we say that we have five or six home markets, which is the four Nordic countries and the Netherlands and Belgium as well, where we have the origin of these business units.

I have nearly 1,700 colleagues to my aid and the pro forma sales is up to like SEK 3.6 billion now. And talking about sales, we say that we have our feet on the ground in 12 countries, but we actually have sales in over 52 countries by now. So that's quite impressive.

Moving over to the sales and the diversification. And then you can see here the distribution from the various markets, only 25% in Sweden. And of course, we originated were a Swedish company to start with. So up until 2011, we were 100% in Sweden, and now you can see that distribution there.

You can also note here, and we will get back to a bit on the FX here. So euro and Danish krona, it's roughly 60% today. So only 25% on the Swedish krona. And you can see the largest business units, it's only 10% of the sales, on the software sales. And if you look at the customer, also there is only 8% on the 10 largest customers. So all in all, this is a great risk distribution in our mind.

Talking about growth and how we handle that from a strategic perspective. We work with the business model, of course. We are usually market leaders in our various niches. We have a high percentage of recurring revenue. So that's the standard for our business units. And then we develop them further, and we do that through this decentralized organization. We do that a lot with innovation and the product investments, and of course, all of that is aimed at fueling the organic growth in the existing business units.

And then, we top up this with acquisitions. So basically, what we look for are the characteristics that I made us successful over time. So great vertical software companies. They are established, they are profitable, they own their own IP, so we are in control of the product road map and they have a decent amount of recurring revenue to start with. So these are the characteristics that we look for when we look into acquisitions.

And speaking about acquisitions, you can see this is last year's, there are seven acquisitions we did up until Q2 last year. We have made two acquisitions and then -- you can see the seasonality there. So it's usually quite heavy at the end of the year.

And so far this year, we have made one acquisition in Q1 of Dutch Intergrip, a nice addition here. And as I mentioned in my CEO comments in the report we released this morning, we think that we have quite a solid pipeline still on M&A. But there are some postponements. There are delays. The discussions are sort of dragging on. It's taking more time than usual, usually from the sellers initiative. And there has been quite a few closings as a result of that in the market.

And a few that has been closed has also been very highly competitive. And here, we are very focused on our strategies and then what we think is a good value for a nice vertical software company, and then we don't, sort of, get carried away and participate in crazy auctions that, sort of, really driving the prices up. So we try to come up with a fair value to start with and stick to that as a strategy.

And when you look also at the different verticals that we are present in, you can see here also a great display of the distribution between different segments and niches. You can see the big ones here, property management, energy, finance, healthcare, very stable. All of those and there are some that are more exposed to, let's say, the volatility and the consumer environment that would be the auto industry, for instance, or trade and manufacturing, fast-moving consumer goods and so forth. So it's always a mix.

But all in all, it's a great stability and we still see quite low risk in all these segments, and we have a very low churn. So that hasn't increased in this time. And I think this is a lot, thanks to that we provide business-critical softwares. So they are not nice to have, they are need to have for our customers.

And the business units, this is a distribution of sales and the proportion of recurring revenue, and we usually talk about this model as well as kind of what the pipeline for M&A looks like, because we are basically a mirror image of our pipeline today. So there are a few bigger ones, but the average is roughly SEK 40 million, SEK 50 million in turnover.

Sharing knowledge is a very important thing within the Vitec and I also mentioned that in the CEO report this year. So we have a lot of ongoing forums, which we call them, where we share best practices across the group, and this is just getting better and better as we grow bigger. So it is a very much appreciated amongst the staff that we have. So we have different clusters and verticals. You can talk about different specific issues in that niche or from a technical perspective or from a marketing perspective or products or features.

And of course, AI has been a really ongoing topic for the last years that we have had lots of collaboration between and I'd like to highlight the very powerful thing when you hear a peer talking about a very concrete and tangible example of how they have done. It could be for internal efficiency, how they use the different models and the tools that we have available for us or it could be from a customer perspective where we actually use AI in our applications.

And two examples of that could be, for instance, real estate agents, both in Sweden and Norway, they use great AI products for functionalities such as describing the neighborhood, describing the properties, tax generating, so that makes the life a lot easier for the real estate broker. So we're really helping them with that.

Another quite advanced thing is within the energy forecasting models where we have, over the years, used a lot of different models for forecasting. It could be weather, it could be production and to forecast that they had pricing. And now that we have roughly 20 different models, and we have trained our own AI tool to scan all of these for the strength and weaknesses in different market conditions and different weather, and then we use the best possible outcome to provide for our customers that they had pricing. So that's also a very powerful way of using AI that has really helped us and our customers.

Moving over to the quarterly results. I would just like to discuss a lot on the highlights here. For the quarter, a 4% increase in total net sales, for the first 6 months, that's a 12% increase. The recurring revenue share is on a high and a good number, 89%. Our EBITA margin and as well as our operating profit was SEK 236 million and SEK 176 million, down 10% in absolute terms. So we get back to some of the reasons or the bridge for that.

But all in all, the operating margin 19%, EBITA margin 26%, fairly good, not our best quarter, and there's absolutely room for improvements here, but better than Q1 for sure. So it's on the right track.

Again, very importantly, and one thing we really monitor a lot is the cash flow from the operating activities. So that's also given the seasonality that we have, you should mostly look at the year-to-date figure there that has a healthy increase to SEK 843 million.

We also provided since last call, the internal metric that we use, which is the cash EBIT, which is basically the operating profit, but net of any activations and amortizations and depreciations related to the product development. So that's more closer to the cash flow generating profits.

And as you can see, that deteriorated minus 5%, but still a good 22% margin there. And as I also mentioned in the report, one of the really things that stands out or rather, I would say, the Q2 in 2024 was the exceptional high number for Enova, our Dutch business unit. And the difference there in their transaction-based grid management products, was down SEK 80 million compared to last year. But at this point, I would like to remind everyone that Enova is doing great. It's a really great business unit. It is totally exposed to the market conditions here.

So the market on the grid balancing market, there are volume and there are price and we don't control any of it. What we can control is, how we -- our strategy and winning the daily auctions and to what extent that we can participate. But it's also the fact that we participate with our customers' energy or excess energy or excess capacity. So we don't -- we were not an energy producer ourselves. We use their excess. So it's a great value add for the customers to have. But we don't have any risk, we don't have any production units to cover that.

But in this case, there is sort of double whammy there. The volumes are a lot lower than last year, and the prices are a lot lower due to higher competition and stable environment. So SEK 80 million down on the transaction based for just Enova and SEK 30 million on the gross profit for Enova.

And you shouldn't mistake the SEK 30 million to try to calculate backwards, the gross margin for Enova. It is a lot lower than that, more in the 20%, 25% region, which is the run rate. So this is a combination of both falling -- volumes and falling prices that make up that number.

But if you add back the Enova, and so all the other 45 business units were doing fairly well. There is, as I said, always room for more improvements, and that is in line with our target for profit such as we should have an operating margin of at least 20% and growing over time. So we are working with that continuously.

Speaking about cash flow then, this is also just the highlights and nothing really out of the ordinary here. It looks quite standard and in line with different quarters that we have with a very strong Q1, of course, when we gather all our prepayments from our customers.

The cash flow from the investing activities that is usually the earn-outs and the activations in there for the quarter.

Net sales, as we see in the quarter, there on the right-hand side, it's a bit up from Q1. So it's going in the right direction and decent organic growth underneath it despite the downturn for Enova. And looking at the EBITA margin, same there. We picked up a bit since Q1 or quarter-over-quarter.

Cash EBIT, which I mentioned was sort of the internal KPI that we use, and this is just to see how the bridge there from the operating profit down to the cash EBIT. So with a 22% compared to the '24, but with that SEK 30 million loss on or less profit, I should say, for Enova. That's fairly okay, as I said, room for improvement, for sure.

I would also like to highlight that we mentioned something in the report on the amortizations on the intangibles and the acquisition-related. It has been some mix change there since last year. So this is perfectly in line, the same we had in Q1, now in Q2. So please use the 2025 numbers when you try to forecast on the future here.

And also looking at the distribution here between the very stable, which is the subscription-based revenues, which is the basis here, very stable and gradually sort of improving over time. And here, you can clearly see the Q2 2024, sort of, outlier there with a very high bar on the dark blue compared to the others, which are more stable. If you look at it in the last 4 quarters, it has been quite stable.

And the organic growth, as I mentioned, and also the acquisition related, one acquisition so far this year and the organic growth, still a very good currency-adjusted growth of 9%. We are expecting that to come down a bit. These are pro forma numbers. So by now, you have 6 months of last year and 6 months of 2025. So it is coming down a bit as expected due to the fact that just the CPI indexes, which usually constitute how we increase our prices are a bit lower this year, of course. So we're expecting that to come down a bit, but still at a few percentage above the CPI level is where we usually land.

And here you can see a minus figure on that transaction base, and that's, like I mentioned, due to the market conditions there for Enova.

This is just comparing the last year on a yearly basis, another way of looking at the organic growth. And then to sum things up, quite stable underlying performance from the business units. Enova, still a good quarter, a fantastic company, which we're very happy with. But there they have a sort of challenging environment there. The M&A pipeline is solid, and we are ready with our available resources for future acquisitions.

And with that, we hand over to the Q&A session.

[Operator Instructions] The next question comes from Christian Binder from RedEye.

First one being, when it comes to increased customer cost on both the organic side and on the M&A side, did you see any change throughout the quarter from some companies we've heard that April was very cautious may kind of normalized. Did you notice something similar? Or was it pretty even throughout the quarter?

No, it's been very similar. Like I said, not really surprises on the upside, but nothing on the downside either. So it's been a bit down, very stable, like I said, but usually stable is good in our environment. But in this case, we were expecting, like I said in the Q1 call, we were expecting when we were there in Q4 that things were looking a bit brighter, but then -- all of you know how the macro environment has sort of panned out during this first 6 months. So it's a lot of wait and see.

Perfect. Got it. And you've already addressed it, but just to clarify, when it comes to this Q2, should we kind of see it as a "normal" performance for Enova?

Yes, normal in the sense that it has been quite stable for the past 4 quarters. Q2 is bit higher, a bit better season-wise, because of just weather and the production mix. So Q2 is still their best quarter for sure, but there's a lot more stability. In hindsight, it's really the Q2 2024. That's the outlier. The rest has been sort of fairly stable, but still there is a seasonality for Enova for sure.

Great. Perfect. And then last question. I mean, you've addressed the potential use of AI several times in your operations. Longer term, you can obviously, for example, increase the efficiency per program that you employ, but they're also like other associated costs. So do you think you can use AI to kind of improve your margin profile over time? Or do you think it will be roughly neutral?

I would say that there is some room for that, for sure, but it will take some time. You have to also remember that we have 46 development departments. We don't have one. So in some of the larger business units, for sure, there is more room for efficiency there. In the smaller ones, one individual can have a lot of different roles. But I think that we can produce more. So yes, we will have efficiency, but we will not necessarily sort of cut down on the head count for that matter, but I think that we can produce more and be more efficient so that hopefully, yes, there should be some productivity gains.

The next question comes from Daniel Thorsson from ABG Sundal Collier.

Yes. I think it's similar to the first question here. But just to understand, Q3 comps, how was Q3 '24 last year compared to historical Q3? And what should we expect for this year roughly?

I think, Q3 didn't stand out in any specific sense. Like I said, it is very stable. So if you deduct the Enova, like I said, Q2 '24, the rest is fairly stable. So I think there's nothing really that stands out or stood out, I should say, in Q3 last year.

Okay. I see. In terms of cash EBIT, can you comment how much Enova was down in terms of earnings year-over-year? Is that possible?

No, we're not guiding on the bottom line profit, but Enova is in line with all the others in terms of margin. But then, of course, the actual kroner there, which I mentioned, the SEK 30 million, that sort of filters through. So it is SEK 30 million less, basically in absolute terms.

I see. And then on the -- I mean, given we have had weaker margin here for two quarters, are you doing some cost reductions within the group, like outside the normal trends and trims you always do, anything this year to adapt to the market conditions?

Like I mentioned, we are a bit more cautious when it comes to sort of rehire. We don't have any big sort of group-wide because, like I said, we have 46 different business units. Some of them are progressing really well and are investing according to plan, and they are, of course, allowed to continue with that. But then, of course, yes, we are more cautious. If someone is leaving, do we really need to sort of rehire that resource right away. And things like that, yes, that is for sure, ongoing all the time.

And then we are, of course, what I mentioned on the earlier questions there regarding AI and the efficiency, I think that's still yet to be seen a bit going forward. But yes, we are seeing increased efficiency in coding. But I think that will be more like that we are able to do more with the same resources, because you have to remember that the environment that we live in, in the IT environment is really hard to get talented people.

And once we have them on board, we really want them to strive and to, of course, produce more in that sense. So -- but yes, we are more prudent or cautious when it comes to rehire people right away. So it's a bit more wait and see on that sense as well.

Okay, I see. And then final question on the M&A market. You said it was a little bit more hesitant. I think all of us could have seen that in Q2, but we also saw that in the public market, the activity started here in June. And I guess in the private market, it's a little bit longer lead times. What's your expectations after summer here and going into the fall? Do you think activity will pick up? Or do you see anything else in your processes?

No, we are expecting the activity to pick up because, like I said, the pipeline is really good, and it has been fairly good. But you can only postpone things to a certain extent. So yes, we are expecting the M&A market to pick up. Then of course, we need to be able to be successful there with our offering. But yes, there are some cases that we know that have been postponed and will sort of hopefully be decided upon during the fall here. And as you saw also on the charts last year, we did two up until Q2, and then we did five during the fall, yes.

[Operator Instructions] The next question comes from Daniel Lindkvist from Danske Bank.

Just elaborate -- to elaborate some more on Enova going into Q3. Now it seems like you're guiding for that it was nothing special with the volumes in Q3 last year or at least not as much as in Q2. But on the profitability side, shall we expect that the gross margin in that business is some 10% lower or something like that, this year when we calculate our numbers? Or what's the fair assumption?

I think that's a fair assumption. The margin, I mean, for both Q2 -- Q1, Q2 this year has been fairly stable, and we're not seeing any sort of further decrease in that. But compared to last year, the prices are lower. And like I said, that's a mix of more volumes in the markets, more players in the market and also very sort of, yes, just stable weather conditions that does that. But at the same time, we are innovating. We are expanding our product offering to look into more and more different product models for Enova as well.

But yes, the margins are -- yes, a bit lower than last year. But like I mentioned, Enova as a total are still very much on par with all the others in terms of the margin, on EBIT level.

I mean, I guess it must be a bit frustrating for you guys. If you have a low quality earnings, be it from Enova being embedded, then nothing happens with the share price. And then you have a low-quality miss in the quarter that's much isolated to Q2, as I read it, correct me if I'm wrong. And then you get to 16% hit on the share price. So actually, this is -- this is a subject that needs to be fully understood by the market, I guess.

Yes. And that's also one way. We try to be a bit more transparent than usual around that specific business unit and the comps there. Because all in all, like I mentioned, Enova is doing well. It is progressing nicely. They are absolutely on par with all the others and also in line with what we actually paid for the asset not to mention that. So it's a good investment, and they are doing great, and it is also by far, the biggest sort of business unit that we have today.

And then my final question is on in the transactional part, you also have the Bidtheatre that entered with two more quarters than last year. How has that business unit performed? And what should be expected since that will also hit the margin profile if they are successful?

Now they are in all the four quarters backwards. So that shouldn't sort of take anything if you just look at the four quarters going backwards from here. Bidtheatre, they have a lower gross margin profile, because like I said, they have a software and then we run through the media purchases through our books. Ideally, that's not something that we prefer, but the customers want it that way. So we just have to accept that.

But Bidtheatre is also progressing according to plan being quite flattish in terms of growth, because in a media spend, it's a bit up to the general market conditions there. But at the same time, they are doing okay, and -- but they're not going to make any changes or distort the numbers going forward. But if you just look at the quarters behind us, they are already embedded in that.

Okay. Okay. And then my final question for Q3, just to be a step ahead for my and others sake, if there's anything we should bring with us in newly acquired units or some new dynamics that we haven't seen before that you could flag in race? Or should it be just businesses -- business usual for the Q3 quarter?

Given that the acquisition we've done so far this year, it came really early in the year and was quite small. So I think that, there shouldn't be any big changes to -- or there aren't any big changes in how we operate today. I mean, we still see a bit lower on the services and on the license estimate now we're 2 weeks soon into July and the market conditions are the same.

Like I mentioned, they are not better, but they are not worse. So it's kind of flattish so far. And one of the companies that has a lot of that is, of course, ABS and they are going into the holiday season now in Europe in August here -- in September. So no, I think nothing really stood out last year and so that should be a fair sort of proxy going forward, if you take the margins that we're operating now and just roll that over.

The next question comes from Predrag Savinovic from Carnegie.

I wonder if you could discuss the overall M&A strategy and rationale for the coming years if you see an environment where multiples are still higher like you have suggested in the report and in this call. So if this competitive dynamic remains, how will you treat that?

I think that given that we have been in this market for many years now, and we have a very sort of clear strategy. So there are lots of companies out there, and we see them coming to the market. And like I said, the private market is slow to move up and slow to move down as well. And what we are thinking is -- that is my analysis so far is some of the postponements are, in fact, that the targets are perhaps not meeting their own ambitions and targets. So you have an IM with a real hockey stick and that they're supposed to take off. And then they are progressing nicely and well, but not in a fantastic hockey stick way. And then they -- okay, am I as pretty as possible right now, so then they are sort of holding on to that.

And that's a good reason then to postpone things. And the few transactions that have sort of gone through, they have either been really early stages and we're not in them or really big companies that have a potential to grow and especially internationally. And there, the competition from PE and others is fierce and okay, perhaps that's not possible for us to compete with, because you have to be prudent when it comes to what you're able to pay. But we are confident that, we have a really good offering and we pay decent prices.

And at the end of the day, especially if you are a founder-led company, the last euro is not the most important thing. So -- but of course, we are looking into our offering and that can be, for instance, last year, we did the two part acquisitions, both Taxiteknik and Trinergy. We bought 60% initially, but we have a clear path to 100% there. So that's one way of sort of mitigating this. So we are looking at different earn-out strategies, and we're working constantly with our offering to better sort of suit the potential sellers. So I think that we need to just think of how we offer the -- how the offering is constructed.

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

Okay. Thank you for listening in, and I hope that we will hear each other again at the next conference call, which will be in October. And I hope you all have a really nice summer. Thank you.