Exsitec Holding AB (EXS) Q4 2025 Earnings Call Transcript

Hello, everyone, and welcome to this year-end report for Excitec. Presenting today will be Group CEO Niklas Ek, CFO Carl Anesson, and me, Hampus Strangqvist. If you have any questions, you can either use the raise hand function or the chat function in Zoom. And with that, I will leave the word to Niklas.

Thank you, Hampus. Hello, everyone. This is Niklas Ek speaking. I am the CEO and has been that for almost a year now. I will start off by making a short recap about our business as a reminder what we do. After that, we will cover Q4 financials and a short market update and also our priorities going forward. We are Excitec, making IT work together, and we exist to deliver digital solutions that improve our customers' businesses, and we aim to be a one-stop shop to the customer. We do this by selecting different softwares and develop in-house integrations that can be reused. By implementing different software and provide long-term support, we aim to be a single point of contact for our customers. The digital tools that we use can address areas like reducing financial administration through automation or use data for better decision making. Our customer base today is around 5,500 organizations and our target market is medium to large size companies in the Nordics. No one customer typically is more than around one percent of our revenue so very low risk in the individual accounts. We combine the software packages we work with to fit different industries and we have customers in many different industry sectors as you see in the slide these are the primary software providers and partners that we work with at this time we are resellers of softwares and the selection has grown to just over 20 software components we combine these softwares with the integrations that we develop in-house and we have a revenue share partnership with these software providers where we market and sell their software to new accounts and make customers successful in using the software over time. The business model is built on three revenue streams. The sales and marketing is focused on selling software together with integrations. This is sold on a subscription model where you pay as you use and this revenue stream has grown to 25% of our net revenue. Just under two-thirds of our revenue is from professional services where we implement the software and make the customers successful in using the software over time. We also do custom development and custom integrations when needed. The third revenue stream is our business model is that we offer a customer a single point of contact support on a recurring fixed price model. Exitec is a Nordic company started out from Linköping, Sweden. Today we are around 600 employees with Sweden being the biggest segment. We have been successful in the last 10 years with growth, both organic and from M&A. Our EBITDA has followed our growth nicely, with an exception in 2024. Xitec runs one of the largest trainee programs in the Nordics and has been doing that with scale since 2015. We are very proud of this and almost 40% of the employees working at Xitec started as trainees. Our trainee program is the main source for recruiting new people and an important addition for future growth. So let's dive into specifics for Q4. I will start off with the highlights and then leave the word to Carl Arneson, our CFO, for the financial details. We delivered a strong finish to the year with an adjusted EBITDA of 43 million sec and a margin of 18%. This is a clear step up compared to Q4 last year when adjusted EBITDA was 30 million sec with a margin of 13%. The improvement is broad-based with positive contributions from all segments and Carl will come back to the segment performance in more detail shortly. I'm also pleased to see that we deliver organic growth of 2% during the quarter. Our recurring revenue from software continues to develop well and has reached 225 million sec on an LTM basis corresponding to a 22% increase year on year. This remains an important driver of both growth and profitability and Carl will cover this in more details shortly. The growth in recurring revenue is driven by a combination of new sales momentum and are continued focused on developing existing customer relationships over time. And lastly, I want to briefly cover an update that refers to focus on our core business before moving on to the financial details. So in December, we signed an agreement to divest our subsidiary Zedcom to Infracom Group, a specialist within IT infrastructure. We acquired Zedcom in 2021, where part of the business was related to Visma Net, which remains within Exitec today. The other part of the acquisition consisted of infrastructure, hardware, and connectivity services. Over time, this infrastructure-focused part of the business has become less aligned with Exitec's core focus on digitalization and business-critical applications. We have not been able to integrate this part of the business with our core offering in the way we originally intended. As a result, we decided to evaluate alternatives for Zedcom, where Infracom stood out as the best long-term owner. We believe this transaction is the best solution for all parties involved. We will continue to cooperate closely with the Infracom to ensure a smooth transition and to take good care of our shared customers. It is currently pending approval from Inspectorate of Strategic Products and we expect to finalize the deal during the first quarter. I leave the word to you, Carl.

Thank you, Niklas. Starting with our net sales, we report a 6% growth in Q4 versus Q4 2024, where the organic growth summarized to plus 2%. Following a stronger Swedish corona, we actually delivered stronger numbers locally in both our segments, Norway and other Nordics. And I will come back to that shortly. During this quarter, we also saw stronger net sales performances in all our segments. And I will get back to that as well. Our growth comes from all our revenue streams, where professional services and software are the main ones. Where the growth in recurring revenues from software stands out also in this quarter. But the overall market sentiment is still that customers tend to push decision for minor system updates. and standard adjustments into the future, while new projects driven from our sales department are developing more positively. Also, looking at the trend the last 12 months, we see a 10% growth year-on-year, where the majority, 8%, is related from acquisitions. Moving over to our adjusted EBITDA, we report a 43 million SEC profit, which is a 42% uplift versus the fourth quarter last year main drivers behind the uplift is continuous growth in recurring revenues as mentioned slightly stronger professional services but also by a solid cost control however and also previously mentioned we still feel that we can deliver even stronger performances almost across all our segments on a full year basis the efficiency in especially Sweden and Norway can be improved and this is also something that we prioritize in our daily operations. Year to date the adjusted EBITDA of 158 million SEC is a 31 percent growth versus last year. So let's continue with the net recurring revenues from software that for 2024 and also a few years back has been a highlight for us. For the last 12 months we see a growth of 22 percent in this revenue stream that made up 25% of our total revenues last year. The growth is driven both through M&A, new sales, and also to a certain degree also from price increases. Overall, the organic growth in recurring revenues as per Q4 summarized to approximately 50% of the LTM growth. this development is of course a very important contributor to our earnings and also a strength with our business model but it's also a good indicator for us that we have a strong offering and that our customers continue to use and deploy the software that we deliver so moving over to our different segments starting with Sweden Sweden delivers a 4% growth year-on-year in Q4 where of the organic growth was flat and the adjusted EBITDA margin also developed positive in this quarter and ended up at 21% versus 17% last year. So we continue the margin uplift trend from that we saw in Q3. The higher margin year-on-year can mainly be explained by stronger recurring revenues slightly uplifting consulting revenues but also as mentioned by a solid cost control. Norway reported a 5% growth in total net sales in Q4 however highly affected by a weaker Norwegian krana. In local currency the growth was approximately 11% year on year. It's also satisfying that we continue to increase our adjusted EBITDA and margin. In Q4, we go from 9% to 15% year-on-year, where an improvement in efficiency was the main driver behind this uplift. Here, we also maintained the margin of 15% from Q3, which was also the highest level that we have had for Norway since the acquisition of the Norwegian business back in 2021. Even though we're happy with the improvement year in Q4 and for the full year, we still feel that we have more opportunities going forward, as I mentioned previously. An improved margin in Norway is one of our key focuses, so a stable and strong margin over time is important for us to build a stronger business ready for future growth in Norway. finally our third segment of the nordics that covers our offerings in denmark and finland reported a growth of 20 percent where 12 of the growth was organic in local currencies the organic growth was 18 for the total segment and by that i hand over to you again niklas Thank you, Paul.

I will continue with a short update on the market conditions and our priorities for 2026. The market environment remains broadly unchanged where the demand for consulting services from existing customers continues to be cautious, which is consistent with what we have seen throughout most of the year. At the same time, we have seen strong order intake in new sales during the year which confirms that our offering remains attractive and the trend with shorter sales cycles compared to 2024 continues over recent years we have seen customers delay investments in their it platforms and this has led up to pent-up demand and when customers feel more confident about the direction of the market we believe there is a need to start addressing those postponed investments. And M&A. M&A continues to be an important part of Excitec's strategy. Activity in the market has increased recently and we will continue to focus on identifying selective acquisitions that strengthen our offering and long-term growth. So our business priorities in 2026. Business Next is a key priority for us across Sweden, Norway and Denmark. Exitec is Visma's largest partner and Business Next gives us a strong opportunity to both migrate existing customers to the cloud and drive new sales. Microsoft is an area where we see increasing potential. Our ambition is to take a clearer position as a partner delivering a broader part of the Microsoft platform which allows us to scale both services and customer relationships over time. Organic growth remains a key focus. This is primarily driven by developing our existing customers while at the same time continuing to invest in new sales to bring new customers into Exitec. This is a reminder about our financial goals. We have a goal to increase our net sales by at least 15% per year over time and our performance target is to increase is our EBITDA per share by at least 15% per year over time as well. Our stability measures is that our net debt must not exceed two times our EBITDA. And the last one is that our policy is to distribute 20 to 40% of the profit after tax. This concludes the presentation.

Are there any questions for us, Boos? yes we have a question from which says could you elaborate on your cogs which increased from 1 million to 5 million this quarter what is the driver behind this hi carl here i can elaborate a bit on that as you know we have some it related business where we also sell it hardware And during this quarter, we saw especially an uplift in our Danish operation, which was a bit higher than we usually have seen during similar quarters. So that's the reason behind the uplift in Q4.

Great.

The second question we have is, what type of companies are you looking to acquire? niche country size etc are you seeing multiples coming down for targets yeah we are looking we're looking broad you can say so we are looking at all our markets that we are present in today and as always if we can find a customer base that's a perfect match for us but but we are looking at different kinds of companies. So it could be a smaller company that gives us a new offering. It could be a bigger one that's already working with the offering that we have today at Excitex. So we are not that narrow in just looking for specific companies. So we are looking pretty broad, but for sure it's better for us if we can add something that we're already good at. And what was the last one? Multiplies.

Yeah, multiples for the targets. Are they coming down?

Well, as I mentioned before, we do see more activity now in the last quarters compared to the beginning of 2025. But a bit down maybe, but it's not that clear sign for us, no. Okay. we have another question which is earlier you talked about expanding your geographical footprint with the same go to market model, what's the status on this expansion yeah geographical footprint, yeah we did that in, if we just look back on where we are right now, so now we are in four countries so we started out from sweden and then we made an acquisition in norway and then we have the same model basically in norway as in sweden and before that we did denmark so denmark in 2018 norway in 2021 and in the summer 2024 we added finland so so that's what we've done in in our geographical footprint uh so we we work pretty much the same with the go-to-market model but then it's it's uh it's a bit different in different countries with with our offering so some of our offerings are stronger in some of the countries for example in finland we have a sales office so we're focusing on selling the invoice system medius so that's all that we do

in Finland right now but in the future we'll probably do other things in Finland as well so that's the status now we're not actively looking to expand to a new country now great and then we have Jakob Benon has raised his hand Jakob you're welcome to to ask your questions yes hello guys can you hear me? yes go ahead congrats on a solid quarter I just wanted to start with, you talk a lot about that your existing customers are still kind of cautious, which has been the case now for many quarters, I believe. And I suppose that this creates sort of a backlog for your customers. I mean, the pent-up demand that you talk about that the customers maybe want to or have to do eventually. is it possible that you can maybe provide some additional color on your customer's backlog like for example how long do you think they can continue to push investment decisions into the future before it starts to have a negative effect on their business or is this kind of backlog more nice to have features that the customer wants to do or is it more neat to have Yeah, good question.

I think if you sum it up and put it all in one pile, I think it's more need to have in the future. We are working more with systems that is need to have more than nice to have. but but but it's it's it's different from from different offerings of course but but what we have seen over the years is that the customers they tend to to push decision and it can be just a small decision to to make a small configuration or an additional integration or change a report So it could be the small things that they are not doing so they can actually live with a manual process for another year or for another quarter or something like that. So that we have seen. But we have also talked over the last year that new sales is good for us. So I think that you asked how long can they do it before they build up too much debt. and i think it can't be that long because they need to be ahead of their competitors as well so i think that we will see that in in the future that they need to to address those postponed and postponed investments but what we see now it's pretty much the same as it's been in all 2025 so there's no real difference okay thanks appreciate the colorful answer there and you state that one

of your main priorities now during 2026 is to increase organic growth and i have two questions about this so maybe we can take it one by one yeah and firstly like what is it specifically that excited can do to boost organic growth i mean you mentioned to develop existing customers and invest in new sales but I mean in my view you're already doing a lot of that with your sales trainee program and so on for example and still like organic growth is in the low single digits which is really good considering the market conditions and that is why I'm thinking like isn't this more of a market environment questions or how much is in your own hands to say when it

comes to organic growth yeah yeah good question i think of course that the market is out there and we can't really affect how the market is but but we still think there's room for improvement in in how we do things so so we are not totally satisfied with our organic growth we still think there's more to do and if we can invest more in in new sales and if we can do even more on existing customers always being that part that suggests new solutions or suggest changes in their IT environment I think that we can do more and we can still be more efficient in in our professional services as well so it's not all up to the market I still think that we can do better

so so I guess it's twofolded of course the market is out there we can't do really do much about it but we still have room for improvement on exciting as well okay still still things to do them on your own and the second question i had on organic growth is like in your financial goals that you stated here in the end of the presentation again your ambition is to grow by 15 percent per year like roughly what level of organic growth over time do you estimate that you need to achieve to reach uh your goals i i of course understand it depends on the mna market but like what would you be satisfied with over time well i guess i would really like to have two digits on the organic growth but i think it's reasonable maybe like 50 50 if we can do it like that and do it that consistently over the years that would be good for us so if you need an answer maybe 50 50 something like that yeah perfect appreciate it and also it was interesting you state that here on the M&A market you have seen some increased activity recently and like could you provide any more color here are there any specific acquisition targets you're looking for verticals

i'm thinking maybe microsoft as you have entered that segment recently yeah no it's quite a the answer i gave just previously here i think that we're looking pretty broad and to to all our our countries so what we have seen in the activity is that we we are getting more uh questions we're talking to to more companies so that's what we've seen uh and especially if we compare it to like q1 q2 2025 now we see more activities so i think that's positive for us but we we are not that narrow only looking at the microsoft companies we are looking pretty broad

to all our offering okay thanks for that and uh can you provide maybe an update also on mflow and how it's developing in in finland with medius like is it developing according to your expectations and i'm also curious if you expect to start selling more softwares than medius in finland in the short to midterm.

Yeah, Enflow is, we're pretty happy with Enflow. So we ended up the year strong new sales. So, and a reminder, Enflow is our sales office in Finland. So we're focusing on large companies selling medius. So we are pretty happy with Enflow and it's as expected. i would say so uh so i think uh and an important addition to to the mflow part if we look at the numbers and the other nordics is that we that we do the the services from sweden so so we sell an implementation in finland to to our larger customers using medius and then we do the actual implementation with the swedish consultants so so that's not anything you see in the in the numbers when we look at the segments um but but going forward we we are looking into to expand that to to add more offerings but as you know the the economy in finland has not been that great over the years so so we are not rushing into anything and taking big risks so so we're doing it bit by bit but but we are looking into it for for sure and in future i'm i'm pretty confident that we will have more offerings in finland than just medius okay perfect thanks for that and uh continue with a question on on norway here you you i think you talk a lot about that you see a lot of potential for like further margin improvements in norway and i think we have touched upon this subject on previous conference calls as well but i mean norway has a much higher share of software revenue than sweden for example but still a lower margin like would be nice with a refresher like is there anything structurally that says norway cannot reach the same margins as sweden or why does the numbers look like this no it's not really any structural thing going on in norway that that we that we don't have in the other countries so so what we have been working on in the in the last year is to to work with our professional services and the consultants over there to to be more efficient uh and and a reminder when we did acquisition of vitari in 2021 the margins was uh much lower than compared to now so we are taking step by step to be more efficient and to to to be more aligned with the margins in sweden so we are getting there but it takes some some times and if we look at 2025 i think that we we find a level of stability that's much much better than compared to 24 and 23 and so on so i think we are in in a good place but with that said there's still room for improvements when it comes to efficiency and when it comes to new sales and and so on so so we have a large customer base and we have been in the past good in taking care of the customers but we have not been that good in

new sales so that's also something that we have been working on for for several years now and i think that with the business next that we talked about as a priority for 2026 i think that the potential is still higher so so we i i hope that we will see more more from from norway in in the future here and i think that we are in a good place now yep i fully agree i mean i believe you have uh you have had like flat sales development in norway for the past year but the margin has still doubled i i think was the last figure i saw so it's very impressive what you're doing there so it's just curious to see um how you look in the future there as well but the final question for me before i'll let you go here uh there's a lot of uh talk in the market around the software companies at the moment and you work with a lot of them and it's uh regarding the potential threat from ai and here i'm i'm a bit curious about like three three different revenue streams for you and if there's any risk to these and maybe we can start with the first one like do you see with ai that there's a risk that customers start building its own softwares, such as like an in-house CRM system, for example?

Well, in the short term, no, I don't think so. Not our customers are mid-sized companies in the Nordics. They are not there yet, maybe in the future, but I don't really think that they will focus on building their own software where they are focusing on how they can find new customers to them and so on. So we actually did a customer survey here in the last year talking about AI because there's a lot of buzz around AI and we would like to know what our customers think about it and what they are planning to do in 2026. So for us at Xitec, our customers, they are not focused on AI and especially not building their own softwares. They are not there yet. So in the short term, no, I don't see that threat, and especially when it comes to critical softwares as ERP or the BI system and so on, taking care of data, data warehouse, data lakes, that's a complex business. So I don't think there will be a threat in the short term there. But in the long term, I don't know. I don't think anyone knows really. So we will see what happens there. Yeah. And the same question then, but regarding, I mean, the integrations you make between softwares, do you see any risk that customers are going to start making their own integrations with the use of AI? no we have not seen that yet but we are at excited we are working actually with the ais as a tool so i think for us the combination with our consultants using ai tools that's that's really powerful and then of course the question is can we still have the same model with like ours and is that something that's going to change in the future yeah i think that will change if we if we can be more efficient but we still provide the same value to the customers we need to be to be on our feet and to maybe change how we how we how we do that but but that that part of the business we have seen already that we can be more efficient using ai for sure and for excited we are working in the whole group with the ai initiative so so we're doing it, how we can be more efficient in-house, but also how we can help the customers that want to do anything today.

Okay, interesting. And finally here on AI, the risk on, I mean, the very important RIN sales that you are talking a lot about.

I mean, do you see that AI has a risk here as well that customers like start to do small fixes or updates on their own with the use of ai is there anything you have seen like now for the couple of past quarters where their in sales maybe have been a bit lower than than you're used to yeah no the short answer is no we we have not seen that the customers are are doing it by themselves because of ai we are experts on what we do and we provide complex solutions for for it so and our customers that they have not that competence on doing that so so so not really uh if it was that we would work with much simpler systems maybe then you can just replace consultants but with the simpler it systems you usually don't need that much consultant help either so i guess that just what it is but but for us now we we have not seen that okay thank you very much for answering all of my many and way too long questions i'll get back in line here thank you yes thank you jacob and we have a one more question here through the question function you haven't done any m&a during 2025 could you reflect upon this and also talk about your expectations and pipeline for 2026 yeah that's right we have not done any m&a during 2025 but but still this is a part of our strategy at excitex so nothing's really changed about m&a we are still working with it and we are building pipeline talking to companies out there so so we are working actively with it and I think the pipeline looks pretty pretty good for 2026 but as always the timing needs to be right and it needs to be right for for both the seller and for for the buyer but nothing's really changed from the past when it comes to M&A we're still working with it just as before.

Great that That concludes all the questions, and I thank you all for listening in to this report, and I wish you a good continuation of 2026.

Thank you, everyone. Thank you, everyone.