BTS Group AB (publ)

Hi, everyone, and welcome to today's conference call together with BTS Group. My name is Ida Tillas.

I work here at DNB Carnegie. And today, we are pleased to welcome Jessica Skon to the studio.

As always, if you have any questions, please feel free to ask them in the live chat on the right hand of your screen. So without further ado, Jessica, please.

Thank you very much. Good morning, dear investors.

I am very happy to be with you today for our Q1 report, and I am super pleased to announce that BTS is back to profitable growth and we expect that to continue. Our revenue at the group level grew 5% in the first quarter, while EBITA grew 19%.

We're very pleased that our North America turnaround is complete. BTS Europe continues to do fantastically from a growth perspective and a profit growth perspective.

And BTS Other markets had a rough start to the year, and we expect them to recover during the second half. So if we double-click into the 2 or the 3 different markets.

And the other thing that I'll go deep on is that AI continues to be a very strong force for good for the firm, both in terms of our competitiveness and driving growth and in terms of our internal abilities to reinvent ourselves and drive productivity. So if we look at BTS North America, back to profitable growth.

Just to remind you, it was a year ago that we declared we wanted to do a turnaround in North America. We shifted out the leadership, and many different leaders took new roles.

We had 3 core strategies at that time, which was to make sure that in every proposal, we were using our most advanced AI technology products and services, and we are helping our clients with their AI ambitions. We decided to focus more on the core of BTS, which is training, leadership development, sales and activating strategy and change, and, of course, focus all of our time and attention with our clients, helping them to reinvent themselves and stronger commercial activity.

And these worked. In the first quarter, we are back to growth with 8% growth in revenue and a 50% improvement in our profitability.

BTS Europe continues to have very strong growth. That's due to the high win rates over the last year, those projects continuing to move and a bunch of small projects that we won in the fourth quarter.

They had 17% revenue growth, all of which was organic. And we're seeing significant growth in 2 of our large markets with a lot of growth potential, which is France and Germany.

BTS Other markets, we expect them to have a recovery later this year, and their profit dropped in the first quarter, which was primarily due to Southeast Asian operations, in particular, our team in Thailand, Japan and Korea. We have, of course, many actions underway that we've been addressing for the last few months.

We have -- given that this market went down in revenues, we are moving resources around most of the world market. And so the countries that are having strong growth can continue to drive growth and use those resources.

We have a much stronger revenue growth plan. We have strength in leadership.

We've moved some -- a very strong partner for one market over to Southeast Asia. They're more dividing and conquering.

We have a more industry-focused kind of client-backed approach in terms of our go-to-market activities and so forth. One bright spot in Other markets.

Despite the war, our Middle East team is having very healthy double-digit growth in the first quarter, and we expect that to continue in the second quarter. And our summary on AI for the moment is actually we are in the sweet spot, right now, both for helping our clients in terms of evolving their companies to take advantage of the AI movement, AI era, but also in terms of our ability to invent internally at BTS, making our products more competitive and driving absolute breakthrough efficiencies and productivity gains for the firm.

If we look at the statistics behind this, our core AI booking revenue, meaning helping our clients with their AI evolution, grew 35% in the first quarter. The AI product bookings went up 3x from a year ago.

I believe, we've been studying this and we help our clients do this, that BTS is in the top 5% of global companies right now because not only have we achieved clear ROI from AI, but we've done it 3x, and we can see more coming in the future. And we can take all of those applied AI learnings around how we've disrupted our own products and services, our own workflows and help our clients able to do the same thing.

More and more, week by week, day by day, through our own experiences, this could not be more different from digital transformation of the past. This is a people, a leadership and a culture issue.

This is not a technology issue. Internally, we've talked about this all of last year.

The productivity gains from our own AI workflow reinvention in last year in 2025 is equaling SEK 74 million in annual savings this year in 2026. And all of this is great, and it's very exciting.

And maybe equally important and exciting to stress is that the core of BTS demand remains very strong. BTS has never been a traditional consulting firm, right?

And our core is about building breakthrough experiences and simulations in offsite. So top 500 meetings, top 50 meetings, CEO, C-suite meetings.

We pull people out and they simulate the thing they're trying to get done or the future of their firm. And clients are choosing to spend a lot more money and time bringing their people together, which I think is the counterbalance to the AI and the technology.

And then we're also good at scaling adoption and change. And right now, we have clients saying, 25,000 people just got Claude.

Can you help us with the activation, the adoption and then the shifts that are going to come from that? So that's working at scale to support adoption and change.

And as I mentioned last time, the team is doing a really nice job of attracting some of the best AI companies as our clients. I'm very, very proud of that.

So that's the quarter. If we take a step back and just remind ourselves like why is BTS a great investment.

We are back to sustained profitable growth. AI is creating more opportunities for growth for the firm and improve productivity internally, while our core remains in strong demand.

And our growth has been and will continue to be capital light. If we just click on all 3 of these for a minute.

The first one, back to sustained profitable growth. We have an amazing global client list.

We operate in 24 countries. We have been very innovative in how companies learn, change and perform for 40 years, and it is particularly important right now with a very unique value proposition.

We still only have 1%, maybe max 2% of the global market share in our space, and we are way ahead of the competition in terms of our simulation capabilities and how we're using AI. And I would say sustained growth is in our DNA.

It's what the company knows. It's what we're proud of.

It's how we know to operate and grow talent. We've had 13% revenue CAGR from the time we went public to 2022.

The years from 2022 to 2025 was held back simply for one reason. It was 1 unit out of 3 and the mistakes that we made in that unit that was dragging us down.

2026 forward, our biggest unit, North America, is back to growth at 8% revenue and 50% profit improvement. And we expect that growth to continue this year and into 2027.

The second one, I've already made these comments, So I can skip over it. And the third one, our growth is capital light, right?

So if you think about the history of the firm, we've grown 12x since our IPO. Roughly 2/3 of that has been organic.

We've paid for a great number of acquisitions during this process. Despite that, we also give about 50% on average of our profit through dividends.

We've asked for no capital, no new capital from our shareholders. We have a very strong net cash position and our cash conversion is 97% over the last 12 months.

So the outlook for the year remains unchanged, and I will remind you that we never change our outlook after the first quarter. So thank you very much, and happy to answer your questions.

Perfect. Thank you, Jessica.

So starting off with a question from Johan Sunden at DNB Carnegie. When do you expect licensing revenue in North America to show year-over-year growth again?

You delivered quarter-over-quarter growth in Q1.

Great question. This year would be my guess, my best feeling on that.

Yes, we continue to get a lot of demand for our simulations, which licensing is a part of. We're working at scale more and more and at speed because of the breakthroughs and how we -- our ability to build our simulations.

So sometime this year.

Sometime this year.

Yes.

And are you finished with the cost cuts take in North America? Or are there more to come?

We're not finished.

Not finished. More to come.

Yes, there's so much innovation happening, right? And with AI, there's a lot of small innovations that are going on and then something big happens.

And when something big happens, it's very disruptive and then it requires transformative look at the team that you need and the roles that you have. And for sure, there'll be more to come.

We also have a question here from the chat from [ Marcus Ramstrand ]. So the report talks about changes to U.S.

tax legislation in 2025 that's affecting BTS North America. Is it possible for you to guide concerning the tax rate for BTS going forward?

I'll come back to you on that.

How has the win rates developed in Q1 in the various divisions? And how does that compare to Q3 for 2025 and Q4 '25?

So we see a pretty strong correlation in the win rates with our growth in the units that had strong growth in the first quarter, even though there's usually a delay, right? So win rates in Europe remain strong.

Win rates in North America remain strong. Win rates in our 5 core strong markets in most of the world feel good, which the issue then is goes back to Asia, as I mentioned.

So I will say, though, that the pipeline is growing there. And we sense that the turnaround is likely in the second half.

Okay. And speaking of Other markets and Asia, how serious is the issues that you witnessed in Q1?

And is there a risk that the turnaround in H2 does not materialize?

I mean, there's always a risk. Historically, at BTS, most of our bigger unit turnarounds take about 3 quarters, right?

That said, given everything we can see right now in terms of deals won and proposals and the movement, we feel like they've got the right energy and the right steps in place. So...

So hopefully, H2 then. Perfect.

Sorry, there's so much questions. So this is Daniel Thorsson from ABG.

Great. How much of the SEK 74 million annual savings in 2026 are expected to be reinvested in growth opportunities versus purely lower operating costs?

Vast majority is lower operating costs. I mean, we will continue to hire, but this is net bottom line gain.

Thank you. And also Daniel Thorsson, ABG.

What sectors and countries are driving the positive start in Europe?

Yes. France and Germany, in particular.

Defense sector. Strangely aerospace.

It's -- we're pretty spread out, and there isn't kind of one simple big growth industry for us.

Okay. So it's kind of mix, all over.

It's mixed, yes.

Okay. So [indiscernible].

Hi, Jessica, there has been talk about the third AI savings program before. Can you tell us anything about that and how that pans out?

Yes. I mean, it has to do with another breakthrough in how we deliver one part of our portfolio, right?

And similar to the last ones, that means, in general, places we might have had 7 unique roles to deliver particular products or service, that gets collapsed into 1, 2 or 3 depending on the client problem. So it's very similar from that perspective.

And we're working through the implications of that right now. So...

Great.

I'll just say it will be smaller in scope than on the last big one, but it's still meaningful.

And a follow-up on the year-over-year trends in the North America licensing revenue question from Johan. You guided on Q2, Q3 in your Q4 report.

Has your view changed after the Q1 report, the outlook? Or is it still the same?

For North America?

Yes, on the licensing.

On the licensing in particular?

Yes.

I think it's still the same. No change.

No change? Same?

Yes.

Let's see if I missed. Oscar Ronnkvist is asking, please elaborate on the comments about software clients being a little bit more cautious.

Can you tell us some more about that?

What was it called? The SaaSmargeddon, Armageddon of the SaaS company, right?

So when Claude released their latest products. Maybe the simplest way to talk about this is how we're thinking about it inside BTS because we're also a client of many of these software companies, right?

And my experience with the Claude product, in particular, is it's essentially kind of wrapped my desktop, right? So when I'm using Claude and when I'm doing my work because of the natural plug-ins to Slack and Box and Salesforce and all of that, I don't go into those files or those software holders really anymore.

I'm kind of working on top of it. And so the world realized that, right?

So the big question right now is what are the traditional software companies going to do to remain at the highest level on the stack versus what's the LLM models going to do to create their plug-ins and then push them down, right? And that's going to be the fight for some time, I'm assuming years.

So that's what they're wrestling with. That's the fear, that's the reality.

We'll see how it plays out. And -- but I think what's really important for BTS is that, of course, we continue to help the traditional software SaaS companies, but that the best -- some of the best, most leading AI companies right now are choosing to partner with us.

And we're super proud of that, and that's where hyper growth is.

Nice. Oscar Ronnkvist is asking how has bookings year-over-year developed in North America?

Fine. Good.

It's not a red flag at the moment.

Yes. Okay.

Sweet. So we're down to the final question.

So if you have anything else, please write it in the chat. So we will cover that before we sum up.

So final question on the guidance going forward. How confident are you in sustaining your trajectory through H2?

And what are the key risks basically going forward, H2?

The main risk is the turnaround in Asia for most of the world. And currently, I will just say the 3 units feel very similar to the first quarter.

So it feels like we're kind of marching with a similar narrative here in the second quarter.

Okay. So we got a few more here.

Can you walk us through how your unit economies have changed in each step of your delivery from internal AI, both development programs and license? It's a big question.

Well, I think if we take that lens, what's maybe the most important thing to understand is the biggest AI innovation we've had is how we develop custom simulations for our clients, which is still the most maybe differentiated part of the firm and it's the history of the firm. That's what we're most known for.

And what the new AI-enhanced approach does is it speeds up the time from when a client wants one to when they can have it. And you can look at that from 2 lenses.

What the first quarter showed us over time or over the first quarter is that we sold way more simulations than we have in the past. I can tell you just in one unit, for example, in North America, the most we've ever done in a year was around 74.

The team did 55 in the first quarter. That means that there is a lot of client requests that are saying, "Hey, I'm calling you out of the blue.

In 2 weeks, could you deliver a custom simulation for this meeting?" And in the past, we would have said that's impossible.

It takes us 3 or 4 months to build it. Now, "Yes, of course, we can.

We'd love to. Let's meet with your executive team and get this thing going."

So it opens up fast-paced client needs that we can respond to. Now at the same time, if you're only getting paid 2 weeks to build something that used to take you 3 months, that could be looked as a down.

But with the volume and the growth, so as long as the growth is there, the margins are much higher on each project. So that's the implication on the development versus delivery versus license.

Bottom line is our clients can consume some of the coolest parts of what BTS has to offer with speed and have access to it. And for our long-time loyal clients, this is a dream for them because they've always said we wish we could do 50 of these simulations with you instead of 2, but like we can't afford it or whatever.

And so right now, it's a very net positive for us. Yes, that's the biggest change.

We haven't seen a change in the pricing of the revenue with the delivery. And then on the license side, as I mentioned last year, some of our license is just content and the market -- the content market has completely changed, but it's a small percentage of the total business.

So...

Thank you. Looking at your profitability and margins strengthening this quarter, would you say it's mostly OpEx related?

Or are any underlying shifts in the project profitability here?

Yes. It's both.

It's what I just explained in terms of the profitability to build the simulations and the AI breakthroughs there. And then it's the OpEx savings that came along with the invention of how to build our simulations, which is much smaller teams now, a lot less back and forth between the operational teams and the customer teams.

That's a big change.

Combination of both.

Yes.

And what do you need to see to upgrade your FY guidance, which looks cautious given the easy comps in BTS North America?

Yes. I mean, I just want to reiterate that we don't change our guidance after the first quarter.

And so we don't have to change much.

And what would you say you'd need to see in order to...

Nothing.

This is how it goes.

Yes.

Thank you. And -- so can you give us some more color on what you're actually doing when you act as a partner of choice for AI companies?

Maybe you covered that a little bit already, but...

I'm super happy to do that because I think it's profound. I think it's profound for the world.

right? And it has potentially a really big opportunity for BTS.

So what we are doing is we are helping clients understand that they can actually trust their people and their teams to reinvent their work. And with AI, because it's so surgical in nature, you need people to work activity by activity for the innovation to become unlocked, right?

And the people who are best suited to do that are the people who do the work, okay? So we help them create the more innovative conditions, hands-on keyboard, scaled, getting the teams to start to use AI to rethink their workflows.

That's the first step. And we do that.

I can tell you, we have one client that said 22,000 people are going to go on Claude. Can you help activate and adopt that?

We will organize all of those scaled, hands-on keyboard sessions, role specific. The same client said, we have 22 workflows that we want to kick off.

So think marketing or inside sales or whatever the workflows are. Can you guide and work with those teams and those teams' bosses to create the conditions for low-scale innovation, but then the conditions for a really big AI breakthrough?

That's half of -- and the other thing that client said is we want to rethink our strategic planning process with AI. So the first step is how can we get some automation.

They have like 9,000 data points that go into it. And when you start to go in with an automation lens with AI and a strategic planning process, what happens naturally when you're doing that, the team starts to think differently about the actual process itself.

So then working with them and their leadership team on how to improve it for the next year. So that's one client example.

I think it's a very good illustrative view of what we're seeing. And this is a big shift because I would say through last year, most of our clients were still thinking either we're just getting started or everyone in the company has one AI tool, and we're not really seeing a very big return yet, right?

But I think what I just expressed is kind of the next wave. And so we help create the more innovative conditions for the teams to reinvent their own work.

And then we call that flywheels. And then once a breakthrough happens, like what's happened at BTS in a few spots, we call it an AI diamond, then we help with the global adoption and change management of the new ways of working around that diamond.

And the second half is when you start to see P&L value creation. So that's it.

That's how we're helping. And we're just taking what our teams needed to do both of those steps.

And they feel very different. One is more playful, more innovative, more tinkering, more creative and the other one feels like a transformation, right?

But a transformation with cool new tech, that's a lot easier to adopt than, let's say, an ERP implementation in the past. So I hope that's helpful.

That's very helpful. It's a very interesting shift.

Yes, definitely. Yes.

And also on the topic of AI, given your increasing speed for each project, how much have your average invoice decreased for each project?

I actually don't have that data point. So I can come back on that.

Yes.

And there was a question from Karl. And he has a follow-up question as well.

Could you dig a bit deeper into the development of the license revenue? When do you expect license revenue to start increasing year-over-year again?

It's a balance between the old school license revenue and the new school license revenue, right? So on the data point that our AI products and services have gone up 3x, that is license revenue, right?

It's just that's, I think, around SEK 6 million or something in bookings, which was nothing 4 quarters ago, right? And so that one is growing big.

The old school, as I mentioned, content and some standard training workshops that have been in place for a few years, that's dropping. So I don't know when the -- exactly when the turnover effect is going to happen.

My best guess right now would be the end of this year, probably, but we need to go deeper in it.

Perfect. Okay.

So I think that was it. There's a lot of questions in the chat, but I think we covered it all.

It's been a lot of AI, North America, licenses. Do you want to have a few seconds to just wrap up the quarter?

Sure. I would just say, I think everybody feels good.

We feel great that the biggest unit turnaround is complete and that we see the success of both the AI internal innovations and the competitiveness of our products and the top line growth and the bottom line, in particular, performance in North America. So we're proud about that.

And the -- we're very proud of our growing partnership with Anthropic and some deals at Google and some other cool clients there. So we're set up for hyper growth from that industry.

Yes. Europe is doing great.

And the 5 biggest units in most of the world are doing very well. They're just dragged down right now by a few of the countries in Asia.

So that's the story.

Perfect. Thank you so much for coming, and thank you, everyone, for listening in.

Okay. Thank you.

Thanks.