Thank you, and a warm welcome to everyone attending this conference call today. I'm Patrik Fransson, Head of Investor Relations at Vitec Software Group, and with me is our CEO, Olle Backman.

First, we will give a short overview of Vitec Group and then followed by comments on our report released earlier this morning. After the presentation, we will, as always, open up for questions.

Olle, with that, hand over to you.

Thank you, Patrik, and warm welcome as well from my side. We will just jump ahead, as Patrik said, into the report.

This is us, Olle and Patrik, your hosts for the day. Just taking the Vitec in brief picture, as we always do.

So, 27,500 business-to-business customers. We're serving that at the moment.

We do that through the 49 business units or companies that we have. Feet on the ground still in 13 countries, but all in all, we have sales in over 60 countries by now.

The pro forma sales roughly 3.7 billion Swedish. 85% of that is recurring revenue, which is an important part of our business model.

To my aid, I have the benefit of having 1,870 colleagues by now. You can see the sales distribution there on the right, and we will get back to that.

Talking about sales distribution, we have a really broad exposure, but what we like to say, a very limited dependency. You can see the largest customer business units and of the total is just 8%.

Of course, the 10 largest customers only account for 7% of the total sales, so that gives us a great risk distribution in that sense. Also on the geographical markets, you can see down there, they're quite evenly distributed: 25% in Sweden, 24% roughly in Finland, 14% in the Netherlands, and so forth.

Good distribution, and this is also something we normally look for and really appreciate in the M&A investigations that we do, is to search for companies that have a similar good risk distribution. Talking about growth, how we do that, we call that the responsible growth path.

What we look for when we acquire companies is, of course, that they are vertical software companies, that they are established and profitable to start with, that they own their own software, the IP rights, they have a proprietary software, and they have a business model based on recurring revenue. Then, if they are successful, we continue to really nourish that business model, making them market leaders if they are not already market leaders when they come into the group.

Then we further develop that through the decentralized organization. We look very closely and monitor product investments, and of course, we don't just invest for the fun of it, we invest in future growth, in the organic growth.

Going forward, then, being a perpetual owner, we continuously develop our companies in order to make these small but nice incremental steps all the time to continue on the growth path. Talking about acquisitions, this is the four latest ones, two for last year and two earlier on this year.

We did not conclude any acquisition during Q2, but we finished two really nice one in Q1: Dutch OutSmart and then Swedish InfoMetric. You can see on the bars there that in total that these two have a combined sales of roughly 190 million Swedish kronor added to the group.

When we look at the different verticals that we serve, we have a great variety of those, roughly 22 different verticals. You can see the top five ones there in percentage: Property Management being the biggest one with 18%, followed by the Auto Industry for 15%, and then Healthcare and Welfare sector of 11%, and then we have Energy and Utilities, 8%, Bank, Finance roughly 9%, and then it goes on.

In these bubbles, we can have sometimes just one business unit, or we can have multiple business units in multiple countries as well. Talking about the business units, this is a chart that we have shown you a lot of times before, there's basically no news here apart from the fact that, of course, it has also been amended for Enova and BidTheatre on the new way of accounting for their revenue according to the agent principle.

Enova is in this bar here roughly 100 million, and it used to be roughly 300 million, and BidTheatre is roughly 36 million, and it used to be roughly 150 million earlier on. You can read more about that in the report.

One big part of and a big benefit of being part of a purely software-focused group is the shared knowledge, which really contributes to the success and just keeps on getting better and better with size. Here, we gather forums internally where we share knowledge, we share successes, we share failures, and it's also a great catalyst for spreading good or best practice or good practice across the group.

Especially, of course, with AI coming in here at a great speed, we can really have these good examples: so, what has been used, what worked, what did not work, what were the experiences, how did the customers react, how did the internal organization react, and so forth. We have lots of these different forums, usually two, three times a year just over Teams, and sometimes they meet up physically as well just to further share the knowledge and making it easier to reach out across the business unit.

A great benefit across the group here. Then talking about the AI, I mentioned some on the report here.

Of course, there are lots of things going on at the moment, and at this time of year, we have just concluded the strategy sessions for each of the business units. We do that throughout May and June, and it has been super encouraging to really learn and see what's in the pipeline, what they have already done, how far they have come, or are they, some of them, on the more early stages, but everyone is doing something.

It could be internally, it could be both internally and in the customer applications as well. We firmly believe that it is a deep deep learning here and goes just faster and faster, and the value proposition are broadening the scope what we deliver to the customers, things that previously might have been out of scope or too expensive or taken too much time that is now more feasible for us, we can really improve the scope and, in parallel, of course, our internal efficiency in doing so.

We firmly believe that the combination here of, of course, domain knowledge, proprietary data, and just the skillset and the deep cooperation that we have with our customers really underpins this market position that we have and the competitive advantages that goes with that. Then we have a few examples here: if we take a very broad ERP-like system, which we have in Vitec Fastighet in the proptech sector here in Sweden, already two years back, they have been really focused on AI, what that can do for us, starting off internally and then also widening that to the customer side.

Nowadays, we have quite a few agentic-ready—it's more of an ecosystem, it's really going from a system of records to an ecosystem with a system of records in that sense. We have language support, we have ways to publishing text, we have AI assistants in customer support both at our customer side and also our own customer support, of course, internally really enhancing that.

Same goes for Finnish Acute, which is in the healthcare sector, and it's really all about continued automation of the clinical documentation within the healthcare sector, and, of course, here really combined with compliance and security. Vitec Tietomitta, another Finnish company within the waste management, it's also very sort of business-critical, system-critical for our customers that this works.

Then we really are on the brink of releasing a brand-new version, and that version has really been sort of fast-forwarded a lot given the AI applications that we have done. That's more internally still.

Then Vitec Energy, which is a very sort of domain-specific and very pointy products for automating better forecasts, and both the quality of the forecast, but also the way that we can harness more and more different forecasting models, drawing out the best conclusions from that and delivering it to our customers with the benefit and help of AI. That was a few examples of what we're doing in that field.

Then moving over to the numbers. The highlights for the quarter, I really think that, of course, the continued growth in sales, 15% in total, roughly 4% of that, just over 4% organically, and 11% growth in the subscriptions, 20% growth in the transactional software revenues, and this is after we have recalculated everything according to the agentic method, and it proves that there are a multiple of business units that have these revenue streams, and it is kind of a sign that it is a good momentum in the economy in the fields that they are operating in.

Especially here, we can mention the real estate agents that have quite a big portion of—and always have, as long as we have owned them for over 15 years now—part of that revenue is transaction-driven, and there's a good momentum in that market. There's a vast amount of business units that are all contributing to that 21% growth in transaction revenues.

Of course, the cash EBIT, which is our internal metric very close to the cash flow, 18% growth and 1 percentage point up on the margin from 24% to 25%. It's really encouraging to see.

Talking about cash flow, all according to plan, really. This is highly what is expected.

As you all remember, we have basically all the year's cash flow in Q1, which is a fantastic model, and we're super happy with that, and then the rest of the three quarters are fairly sort of even as a total. It's really perfectly in line with expectations and slightly better than last year.

If we continue to the growth, this is growth in total sales. You can see the bars there by quarter or by year and also rolling 12 months there.

If you take the 10-year average growth, there is 19%, which is, of course, super strong, and this year, so far, we are at 15% after six months. More importantly, it's, of course, the growth in profits here.

This is the EBITA results. You can see the increase in both margin in absolute terms and also margin-wise for the quarter.

The growth here over the 10-year period has been 24%. Then cash EBIT, our internal metric here, that's mentioned on the quarter here: 1 percentage up on margin from 24% to 25% and increase also in absolute terms, of course, actually making it one of our absolutely best quarters in terms of cash EBIT performance.

The organic growth, important, like I mentioned, we divide that by subscription, which is the maintenance revenues, the SaaS fees, and the hosting fees, that grew 4%, or if I should say 4.4% actually, in the quarter, just under the mark there, 4.4%, also in line with expectations. We are seeing less of a tailwind from price increases than last year just due to the fact that they are usually CPI-linked, and that has roughly gone through by now.

Then you can see there the 21% growth in transactional revenues. To just sum things up, it's been a fairly sort of okay to strong quarter, I would say.

We're happy with the results all the way through, and it's really very much according to plan, I should say. Like I mentioned in my text on the CEO comments for the report, we are seeing some sort of light in the tunnel in some of our business units.

There is more activity today. You can, when you contact a customer, you can get a meeting within a week or two rather than, 'Okay, don't call me, I will call you in three months' time.'

These kind of effects, we haven't yet seen it in the revenues, but we're for sure building up order book and the momentum for the next few quarters ahead. We're cautiously optimistic on that side.

The same goes for the M&A environment: more things to look at, more dialogue on the way. Haven't closed anything yet, but as usual, we use the same criteria.

We are very sort of consequent and around the valuation multiples, what we think a nice VMS company should be valued at, and hopefully, we will be able to deliver something on the M&A as well, but always using the same characteristics and roughly the same multiples as before because we think that is what it has served us well in the few past, and it will serve us well here in the future. With that, I think we will open up for questions.

Hi, good morning, and thanks for taking my questions. We can start by discussing the outlook commentary a bit more in-depth where you state you see improving business climates.

Could you discuss in which areas overall, are you agreeing to the comment that it sounds like the demand is increasing, and ideally if you could potentially translate this into organic growth numbers, maybe even?

I can sure elaborate a bit on where we see that. We have seen that across, like I said, the healthcare sector and the sort of public sector, that has been an increased demand in that space.

That is, of course, always not sort of dependent directly on the general economy, but nevertheless, they are picking up in that sense. We are also have seen it in the sort of proptech or real estate sector as two good examples there, and then, of course, also in the real estate agent sector.

All these three have been really sort of picking up, like I said. We haven't yet seen it in the actual revenues, like I said, it's more the fact that earlier on this year and all throughout last year, it was more like, 'Yeah, it's interesting, we can discuss it, but we can do that in the next three months or six months or something.'

Now, you get into the meetings, you get into the dialogue, and also in some cases, we've actually been able to sign a few orders as well. That's really encouraging, and it's, but as I said also, it's not across all of the business units, but for certainly in those three areas, it is picking up, and that's really encouraging to see.

That's very good. Basically, there could be some lag before we see this in the reported organic numbers, but perhaps towards the year, you can see even further improved growth rates due to this better climate you see now?

For sure there is a lag here. If we're signing orders today, there is an implementation.

That's the beauty of, we are delivering mission-critical, quite complex system. It shouldn't be easy either to just put them in or to take them out.

It's sort of built into the business here. There is for sure a lag, but it is encouraging nevertheless that we are in dialogue.

We have signed more orders now than the earlier parts of the year and all through last years.

Yeah. Very good.

Then in terms of the improved organic growth on the transaction revenue side, previously it was more tilted to Enova, but now with the new reporting, it's more balanced. Could you elaborate on the growth in the overall transactions space, which areas you see driving that?

It's actually a lot of the same areas that I discussed that we have seen. We usually see activity in our existing customers, for instance, in the real estate agent sector that has quite a large portion which is driven by transaction.

Especially in Norway, where we've had tremendous success and there's a really good momentum in the real estate market. I think they grew there transaction-based over 30% quarter-over-quarter.

That's one. Then it's more the fact that we have had these kind of revenue all year, but it's just been sort of muted a bit by Enova and BidTheatre being so large.

At the same time, Enova is actually quite flat on comparison numbers, a bit better on the quarter, Q1 was a bit lower, Q2 was a bit better. If you take BidTheatre, they're growing really healthy and good.

There's more advertising spend in our customers, which then drives that revenue.

Okay. Then finally for me, on the pro forma organic growth on the recurring side around 7%, how sustainable is this growth, in your opinion?

This growth number being more representative of, say, for the end of this year and next year given what you also see in the overall market trends improving?

The pro forma, that is, of course, six months of this year and the six months for last year, the pricing component will go down a bit in that as well because we are at roughly 1, 1.5% lower in terms of pricing tailwind. That sort of leaves it at the number of roughly 5, 6% where we have seen over the years that has been a fairly sort of, yeah, normal number for us to be trading at.

I would expect it to go down perhaps 1 percentage point or something like that. Roughly 5, 6% going forward.

Very good. Thank you very much.

Thank you for taking my question. Perhaps you could discuss what you're seeing at the forefront of AI developments.

Are you seeing any form of new competitors emerging in your niche markets? Are you seeing any changes in customer churn caused by new entrants in your niche markets?

We haven't really seen any customer churn just on the basis of AI yet. Yes, we have a churn as everyone else, but not deliberately on the fact that a specific new entrants just because of AI, no.

Of course, we have more and more startups coming in in certain sectors, and I would say in bank, finance and real estate, they are for sure very active, but they are usually very niched. If you're the sort of ERP provider, if you are the system of records, in that sense we're not seeing, but we are seeing more on the peripherals, on the smaller modules customers coming up.

On the other side, that's also where we are experience most of our own AI development at the moment that we can offer to our customers. We are seeing the demands, we're talking to the customers, and, of course, we're also seeing what the competitors are doing.

Because that is just an easier and faster step. You don't rewrite an entire ERP system that easily, and for sure, you don't exchange it.

It's a bit what I said earlier on. It is sort of built into it that these are very slow-moving things, and they should be.

That's why they are mission-critical.

Okay. A final question for me in terms of AI monetization: do you have any concrete examples of AI features that you found customers being willing to pay for?

When do you think at Vitec that AI could make a measurable contribution to organic growth?

I think going forward, basically, everything that we develop now is somehow linked to AI if new features, new modules, because that has been fueling the organic growth. Because if you have super high market shares that many of our business units have, you already have the system of records.

The way we have grown is through more and more modules, more functionality, and that will for sure be driven by AI or, if it's not produced by AI, which everything is today, it will be an AI application in itself. That will just be a natural step of what we do.

That's just super natural for us in that sense. In some cases, of course, if you come with new functionalities, customers are willing to pay for it, but if you just exchange a current module that is doing one thing with a more efficient one that is doing something that has previously been really hard to charge for, but in that case, if you can prove to your customer that by using this, for instance, some agentic function, their processes becomes more easy, they can save money on it, then you have a possibility to have a dialogue around, 'Okay, what is the customer value, and what part of that should we be rewarded for?'

Thank you very much.

Yes, thank you very much. First one on M&A: you mention increased activity, but also no acquisitions in Q2.

Are sellers more keen to meet at lower multiples as seen in public markets, or is there anything else behind the increased activity mentioned?

What we've seen so far is just the volume, really. Quite interestingly, there's volume of a bit bigger targets, by our standards, I should say, some of the larger targets and also a lot of smaller add-ons.

Still that mid-layer, the sort of what we call usual-sized, the 40, 50, 60 million company sizes, they are more still absent and far and few in between, because they are usually founder-led still and they are a bit cautious, waiting, 'Okay, how will this pan out?' They are usually not in a hurry either.

The slightly bigger targets, they usually have some sort of institutional or private equity co-ownership, and, of course, they need to turn around their assets every now and then, I think that is a lot of what I've seen. Really hard to say, we are really not driving the prices upwards anyway, we are still losing more than we're winning because we really firmly believe that we will put a fair value on this asset, and if someone is willing to pay some crazy multiples, that's up to them.

I can't justify that. Hopefully, we will be able to meet up, and like I said, we've done two really nice acquisitions so far this year, and we did two just the entire last year, and we still have six months to go.

For sure, we are in a lot of dialogues, but we're not going to go crazy, and still be very disciplined around the multiples.

That's helpful. Also, do you see any regional differences in terms of M&A activity?

Also, are you looking outside your current markets to find new targets?

Actually, the sort of the hunting ground is Europe. We are for sure looking outside our current markets, yes.

Naturally, we are less well known outside where we already are, and Europe is a big place. Here in the Nordics, we are pretty well known, and I should say we probably get to look at not everything, but most of the things that are active here.

It is for sure a lot in around the Continental Europe.

Interesting. Final question here, more technical: you have had a tax rate of 26% both in Q1 and Q2, higher than I had both quarters and also higher than historically.

Is there anything making this structurally higher also going forward, that is good to have in mind?

Not really. It's more just the fact that we are tilting more and more of the profits outside of Sweden.

In Sweden, we have fairly low corporate tax rates, both in the Netherlands, Belgium, Poland, and so forth, it is higher tax rates for companies. It's just an sort of adoption to the fact where we are earning the money.

That's fair. The current level is better for the future, I guess.

Yeah. I always say that the current quarter is the best proxy for the mix going forward.

Excellent. Thank you very much.

Thank you. Hi, Olle and Patrik.

I wonder regarding your customers: last quarter, you mentioned that many customers are still quite cautious regarding AI and new features. Yet, you seem to invest quite a bit on those.

Have you seen any change in how customers view AI and your new features over the last few months?

For sure. It is, of course, on everyone's agenda and also our customers.

The fact that these industries are quite conservative, but I think the customers have sort of come to the point, 'Okay, we really need to address this.' Then you usually go to your existing vendor and say, 'Okay, what are your thoughts?

How are you thinking? What is in your product pipeline?'

and so forth. For sure.

We are in more active dialogues, and they want to hear what we are doing. At the same time, I think I said that last time as well, they want to know that they will benefit from whatever comes out, but they don't want to make a total change of anything, it's in their processes.

It's a bit of both. They are really interested and keen on learning more, what we can help them with, and usually taking the small pieces, not doing everything at once.

That's still the picture. For sure, there's more interests, more openness, and willingness to try as well.

They usually do pilots and things like that, we have lots of that ongoing at the moment.

I see. Regarding the improvement in order book and momentum in general, as you mentioned, you have a high market share in most of your segments.

Could you elaborate a bit what kind of things are the customers looking for, or is it that you have managed to find new customers, or how should we interpret that?

I would say, as an overall comment on that, it is our existing customers that we're working on, because we have that deep domain knowledge with us, we understand the processes that they want to become more efficient on, and then we try to embed that into our product pipeline and into our functionalities. It's really more and more about making our customers more efficient.

I think, Acute, for instance, in the healthcare sector, which I mentioned earlier, it's all about automating the processes around the clinical documentation. Of course, that is the core workflow of the customer, but at the same time, there's a lot of regulations, there's a lot of security embedded into it, you don't just switch something to a new feature directly.

It really needs to be tested, it needs to be validated, and then it needs to be implemented in vast organizations that are perhaps not too keen on changing all of the time. There's a lag.

Everything doesn't move as quickly as you might think, but for sure, it is just going in one direction in that sense.

Great. That's all for me.

Thank you very much.

Thanks.

Hello. Just a few questions from my side.

First here on the organic subscription growth: there was a slight step-down here compared to last quarter, and I think you mentioned here 1%, 1.5% lower price tailwinds. Could you just go over the bridge here compared to last quarter and exactly how much right now is price compared to volume on the subscription side?

Like I mentioned,

when we have churn, we usually have that in the first quarter, and then you have the price increases going through also in the first quarter, usually. We haven't really signed any new logos or any increased, like I mentioned in both the Q1 report and the increased market activity that we've seen now that hasn't sort of filtered through in the books.

It's more very steady state. Half of this, it's roughly 4.4% to be precise in the organic growth for the quarter on the subscription part here.

2, 2.5% would be price, the rest would be new sales, and so it's really nothing out of the ordinary that we think, and, yeah. There's no one single thing, it's more just, 'Okay, it's been really slow, we haven't added anything really new, and then the pricing is there.'

So. That's fair.

Then on the cost side organically, of course, last year you didn't add any new employees net if you adjust for acquisitions. Is that a fair assumption for the rest of the year?

Also, how are the salary raises expected to be throughout the year?

Salary raises should be concluded now, the last ones in Q2. Overall, I think we landed on average now across the different countries on 3.5% roughly.

Then, personnel being by far the biggest cost that we have, and the rest is premises, and they usually follow indexes, and they would be 1.5, 2%, something like that. I think we have a good cost control, and also just the fact that all the business units are really careful in recruiting, and I think overall net, I think we were 10 or 12 more employees than we were sort of organically, which is 0.7% or what is it, compared to 1,900 employees, really.

It's been very low organically. At the same time, those who are supposed to grow according to their strategy plans, we have a lot of companies that are really accelerating now, and of course, they should hire more people.

Then we will see going forward. I don't really expect it to go down, but I think that we will probably be here around a sort of net-zero on the FTEs, so.

With the,

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

Yeah. That's the expectation, because the sales efforts have been done, and then the roll-out, like I mentioned, it doesn't really sort of accelerate that fast, because these are mission-critical, complex systems, as I mentioned, and they do take time to implement.

For sure, yeah, no, we are expecting to be able to cope with this level. Should things really boom and become super super good, we don't see that at the moment, but if it continues like this and the slight increase, we can for sure handle it with the organization that we have today.

Okay. Then just a final question: you've more or less already answered this to some degree earlier, but on the transaction side, of course, even with the new accounting standards, Enova still is fairly strong in the second quarter and the third quarter.

Organically, transactions were up 15%. How much was underlying if you remove Enova from that figure?

It would roughly be there around the 15, 20% anyway, because Enova was actually quite flat, a bit increase in Q2, but in the first six months, it was kind of flat, it was basically all of the others that contribute to that, so. That

is also then some easier comparatives,

and I

think, of course, Q2 last year was fairly weak.

For sure, it is a sign of an increased sort of pace in economy and an increased sort of activity in the customer side, because that is what is driving the transactional-based volume. That's one thing.

The other is, of course, as well if you have sold your ERP system to a customer and you want to grow and you want to become a more important and integrated vendor, we then start selling more and more modules, and some of those modules are transactional-based. It's also an effect of the fact that we continue to grow with our customers.

If you've already sold an ERP system, you're not going to sell another one to the same customer, but you can sell more modules, and some of those modules will have a transactional fee.

All right, thank you. That was all for me.

Thank you for interesting questions and a great interest in the Vitec report. By this, we conclude this conference call, and I wish you all a pleasant summer.

Thank you.