Addnode Group (Stockholm:ANOD B) Q2 2026 Earnings Call

0:00 Welcome to this report presentation for the second quarter twenty twenty six. We will guide you through the quarter. With me, I have Kristina Ester McIntosh, CFO of Addnode Group myself is the CEO of Addnode Group, Johan Anderson.

0:19 We will the agenda for today is that we will talk about Addnode Group, our divisions, the cash flow and balance sheet, and we will end with a q and a where you can ask your questions to me and Christina. And you will also find an appendix in this presentation.

0:48 So we start by describing a quarter. During the quarter, our business continued to develop steadily and we have executed cost savings. So what are the key highlights in Q2 twenty twenty six?

1:22 Adjusted organic growth was minus 5%. Reported growth and earnings of Design Management were affected by the renewal cycle of three year Autodesk contracts. As expected, this affects comparability between periods, but does not impact the underlying stable development of the business. The underlying organic growth for Design Management was flat in the quarter as Kristina will explain later more in detail. Acquisitions made in 2025 in Brazil, Canada and Norway continue to perform well. The Process Management division continues to improve. EBITDA is up 26% and the EBITDA margin has now improved eight consecutive quarters.

2:14 The Product Lifecycle Management division continues to deliver improved profitability and EBITDA was up 24%.

2:23 Cash flow from operating activities improved to SEK 62,000,000, primarily driven by positive development in design management. To increase focus on new sales and fully realize synergies from our expansion, we have done an efficiency program that is expected to reduce annual cost by approximately 100,000,000. Excluding cost for the efficiency program mentioned and early renewals in the comparative period, EBITDA amounted to 176,000,000 this period compared to 168,000,000 last period. I will come back to more details on the performance of each division and Kristina will give you more details on cash flow and balance sheet.

3:13 Thank you, Johan. I'm going to take you through the net sales development from Q2 last year to Q2 this year. And net sales amounted to SEK 1,449,000,000 in Q2 twenty twenty six and that compares to SEK 1,457,000,000 last year. And the organic growth, as we just heard from Johan, amounted to minus 11% and the decrease was mainly related to division design management. And I will come back into more details regarding the organic growth in Design Management. Also important to see here on the graph is that early renewals of SEK80 million is included in this graph.

4:01 Contribution from acquisitions amounted to million and the integrations is performing well and the acquired businesses are delivering in line with our expectations. And currency effects in this quarter amounts to minus SEK7 million and that's mainly related to U. S. Dollar and also lies within the Design division where the majority of the USD denominated business resides.

4:33 So I will now hand back to Johan for net sales by category. Why do I believe that Addnode Group has a solid business and a strong position to grow? Addnode Group provides mission critical digital solutions with high customer retention. We are positioned in a market where digitalization, AI and increasing demands for efficiency are driving demand among our 40,000 customers. We have long standing customer relationships, deep domain expertise and a high level of trust from our customers. Let me remind you that the majority of our net sales is owned software and services, representing the value we bring to our customers.

5:25 62% of our net sales last twelve months was from recurring revenue. We have significant opportunities to deepen our engagement with existing customers and gradually increase the share of recurring revenue. We are already seeing how AI creates value, both internally and in the solutions we deliver. And our partners are also investing substantially in AI capabilities. I would like to highlight two customer examples. They illustrate how we support customers in their digital and AI transformations.

6:09 The first example comes from Symmetry and how they support the hospital of the University of Pennsylvania. The hospital was looking for better ways to handle compliance and ensure quicker patient call response times. And how did we do that? We did that by upgrading the system IBM Maximo and developing an AI driven portal with a customized chatbot. This made operational information more accessible and actionable. And it's a good example of how we help customers use AI in a practical way. The second example comes from Technia. We supported RoseNext to connecting its PLM and RP systems with our own technology.

6:56 RoseNext is a developer of robotics, sensors and physical AI. The integration improved data sharing and standardized product structures. It also created a scalable platform for future growth enabling cloud based upgrades. Both of these examples reflect a broader trend across our businesses. Customers continue to invest in solutions that improve efficiency, increase transparency and support long term growth.

7:31 Addnode's strong customer relationships, our deep domain expertise and the data embedded in our solutions position us well to develop and deliver new AI enabled services. How we still look to look into our broader shareholder base. Two things that I would like to highlight. One thing is that we can see that the number of shareholders has increased during the quarter. We have moved from roughly 8,000 to 10,000. We also have had a change in our top 10 shareholders. As we can see, if you compare the graphs, is that, Rubber is now not longer part of our top 10 shareholders as they have sold the majority of their shares during the period.

8:30 So going through our three divisions, design management, product life cycle management and process management. As you can see in this graph, our three division is that the biggest contributor this quarter is process management.

8:58 So division design management. Symmetry is the biggest company in the division. It is the world's largest Autodesk partner and the leading global provider of design and asset management solutions. We are serving more than 30,000 customers across across Europe, Latin America and North America.

9:19 What are the key highlights in Q2? Net sales decreased by 11% to SEK $560,000,000 compared to SEK $627,000,000. Sales of partner software were affected by the timing of Autodesk contract renewals and also by the new incentive model. Our own software and services continued to generate positive organic growth, plus 7% in the quarter. The big acquisition of Autodesk Partners in Brazil and Canada continued to perform well.

9:55 What are we focusing on now?

9:58 Symmetry has had a strong and rapidly growth since 2021. It is now time to set the foundation for the next step in our growth journey. We are deploying a new organization in Europe and US with even more focus on new sales.

10:14 We are realizing operational synergies of 100,000,000 in a cost reduction program. To make these synergies happen, we have one off costs in the quarter of twenty eight million. No additional costs related to the program are expected. The cost savings will have effect from Q3 twenty twenty six and we will have a full run rate effect in 2027. I would now like to hand over to our CFO, Kristina.

10:48 Thank you, Johan. And I'm going to take you through the design management, the movements of the net sales from Q2 twenty twenty five to Q2 twenty twenty six.

11:02 And why also explain a little bit of why the underlying business remains stable in Design division while the reported net sales is substantially impacted by the renewal patterns of multiyear Autodesk contracts. And that pattern includes the timing of the renewals and also the mix between one and three year agreements.

11:26 So this slide describes how the reported net sales has evolved comparing to Q2 twenty twenty five to Q2 twenty twenty six. And in Q2 twenty twenty five, net sales amounted to million. And now this year, Q2, amounted to SEK56 million. And I will describe the four parts, the organic and the adjusted early renewals, also the acquisitions and the currency effect. In summary, organic growth was negative by approximately SEK145 million for the period. However, the year on year comparison is significantly affected by approximately SEK80 million

12:20 of early Autodesk contract renewals. And a number of contracts that was originally scheduled for renewal in Q3 last year were renewed earlier already in Q2 last year. And that creates a favorable comparison base in the prior year period.

12:43 And excluding this timing effect, the underlying business development was more stable than the reported growth figure suggests. And I'm now going to explain the minus SEK 65,000,000 that you can see in this graph.

13:04 And the negative organic growth of minus SEK 65,000,000 consists of two major parts. Firstly, we have a positive organic growth for our own software and services. And secondly, we have negative organic growth from third party software. And the SEK17 million positive organic growth equals the 7% organic growth quarter by quarter.

13:31 The remaining minus SEK82 million is relating to organic growth software. And that minus 82% consists of three main parts. Firstly, we have a margin effect on the Autodesk partner, the new incentive model that amounts to minus 20 We also have minus SEK12 million

14:02 coming from a product mix change where we have more one year contract compared to three year contracts.

14:11 Also other third party sales is included in this amount. And the additional SEK50 million is regarding the renewal effects from a three year cycle. So that means that contracts renewed three years ago can only be renewed three years later. That is minus SEK50 million, the effect. And we can also see that the big transformative acquisitions, Brazil and Canada mainly added SEK86 million to net sales.

14:46 And currency effects was minus SEK8 million, mainly relating to U. S. Dollar. To summarize, our assessment is that underlying performance of Design Management remains stable with flat organic growth looking into the own partner our own software and services and considering the timing effect excluded from that. And I will now hand back to Johan to talk more about the PLM division.

15:20 Thank you, Kristina. Division Product Lifecycle Management. Techne, the company in the PLM division, is one of Europe's largest providers of design and PLM platforms to the engineering community. And North America is also a growing market.

15:37 The portfolio consists of our partner Dassault Systems, market leading platform and our own unique products and services.

15:47 What are the key highlights in Q2? Net sales decreased by 1% to SEK $438,000,000 compared to SEK $444,000,000 last year. Organic growth decreased by 4%. We have had a clear focus in the division the last twelve months to improve margins. This has been successful and we have improved EBITDA.

16:13 Sadly, 8% of the people in the organization has had to left us as part of the process. This has affected service net sales as planned.

16:27 Strategically important customer segments such as aerospace and defense remain strong in demand. We had a solid quarter for Nordics, Benelux and U. S. German market is still stagnant. EBITDA increased by 24% to 41,000,000 and EBITDA margin increased to 9.4% compared to 7.4% last year. Last year's cost savings has contributed to a higher operational efficiency and leaner cost structure.

17:03 So looking forward, the aerospace and defense industry is emerging as an increasingly important growth market where Technia's deep domain expertise, comprehensive offering and global service capabilities position us strongly to capture expanding opportunities.

17:30 Process management. Process Management, compromising 16 subsidiaries, is a leading provider of digital solutions to the public sector in Sweden and Norway, holding strong market positions in urban planning and development, case management, geographic information systems.

17:52 Key highlights in Q2. Net sales increased by 18% to SEK $463,000,000 compared to SEK $394,000,000 last year. Organic growth increased by 2%. There is a solid demand from the public sector. We have strong market position in the public sector, long term experience and solid references help us win new contracts.

18:19 EBITDA increased by 26% to SEK 93,000,000 compared to SEK 74,000,000. And EBITDA margin increased to 20.1 compared to 18.1% last year. Acquisitions and improved operational efficiency contributed to the improved margin.

18:42 The EBITDA margin has improved for eight consecutive quarters. The strength of the division is a highly efficient business model driven by recurring revenue and resilient demand from the public sector.

18:57 So with that, I would like to hand over to our CFO, Kristina. Thank you, Johan. And I'm going to take you through this graph about the

19:12 cash flow and the operating activities. And what you can see in Q2 now 2026 cash flow from operating activities improved to SEK 62,000,000 compared to minus SEK33 million last year.

19:27 And this increase was mainly attributable to changes in working capital and also mainly from Design division. And this graph illustrates you've seen it before, it illustrates the cash conversion over the past decade, which is calculated as free cash flow in relation to EBITA. And the pink trend lines show the average cash conversion around 70% up to 2023 when we know that Autodesk changed the payment terms.

19:59 Before that time, all the three years, when you sign a three year contract, you were paid also upfront for all the three years. That changed in 2023. So now even if you sign up for a three year contract, we take the income or the revenue for the full three years still upfront, but we only get paid one year at the time.

20:24 So after that temporary headwind caused by the shift in the payment terms, we are now seeing a clear upward trend in cash conversion in line with what we have previously communicated. And I would also like to remind you, it's typical for our business that working capital movements and cash conversion fluctuates between quarters and we expect this seasonal pattern to continue with Q2 and Q1 typically generating the strongest operating cash flow and where Q2 and Q3 are historically been the weaker quarters.

21:03 And let's have a look at the balance sheet. So in this graph we are showing our balance sheet, the net debt and the leverage. And we can see now as of 06/30/2026, net debt including leasing amounted to SEK 2.450 which is supported by around SEK 700,000,000 in cash bank.

21:28 The leverage amounted to SEK2.5 million, which is a result of the acquisition activity and the leverage remains within the group controlled range about SEK2.5 million. During 2025 and into 2026, we completed 11 acquisitions, which have resulted in a temporary increase in leverage. And we are focusing on integrating these acquisitions in the business as well as deleveraging and on our balance sheet resilience.

22:02 We also expanded the facilities and currently have around 800,000,000 in available unutilized capacity.

22:13 And also to add on to that liabilities related to acquisitions amounted to SEK $620,000,000, of which contingent considerations are around SEK $540,000,000.

22:29 And I would just like to hand back to Johan now for one of the final slides. Thank you, Kristina. Addnode Group's growth journey. What is the strength of our business model, making it possible to deliver compounded annual growth rate of 19% over a ten year period?

22:53 ANOD Group's business model is based on a strong combination of recurring revenue, organic growth and strategic acquisitions. We work constantly to boost efficiency and the profitability of our companies. Our financial target is to improve EBITDA with 15% yearly over time. Comparability between periods is affected by the renewal cycle of three year authorized contracts, but it does not impact our underlying performance year over year. We have proved that we can double our EBITDA every five years. ANOD Group is well positioned. We have a solid foundation for continued growth and long term value creation supporting our 40,000 customers.

23:48 With that presentation of Q2, we would like to open up for Q and A. The next question comes from Erik Larson from SEB. Please go ahead. Hi. I have three questions. So first off, just a clarification on this SEK100 million in savings. When you say that half will be realized in 2026, does that mean SEK50 million of savings in 2026 or rather that the run rate heading into '27 will be 50,000,000? Yes. We expect about half of that as the program now was implemented now in Q2, we expect about half of that being realized from the H2 twenty twenty six.

24:47 And then the full year will be from 2027. Right, perfect. And then this SEK 20,000,000 in negative impact on net sales from the changed compensation from Autodesk, is it fair to assume a similar number roughly in the coming quarters? I understand you want to close the gap, of course, but can we roughly expect a similar number? As you stated, the impact in Q2 is SEK 20,000,000, and that number is affecting our ability to do new sales and also to reach certain target. So I think that is the best estimation as we have today. We don't really see it going up. It's rather so it's the best estimation that we have today.

25:33 Okay. And then just a final general question. I appreciate the color you gave here in the presentation. And you write in the report that design has a stable underlying business with a growing customer base, etcetera. But obviously, it's very difficult for the market to digest that when just seeing top line and earnings. So how are your discussions in terms of increasing transparency here more even more like sharing the share of three year deals or number of customers, etcetera? Just any thoughts would be interesting. Very good question. Yes, we will continue to work on that. And part of that, we provided you with a flowchart today to see what the components were to make it available that we have a flat development in the comparison here. So we will definitely work with that going forward.

26:26 Okay. Thank you very much. That's all from me. The next question comes from Daniel Thorson from ABG Sundal Collier. Please go ahead. Yes. Thank you very much. I also had a question on the SEK 20,000,000 lower sales in design. I understand the mix between one and three year contracts, the timing of renewal and so on. But this changed incentive model, did this happen in q two? Or was this known before? The changes is from February. It's because it follows the sort of the Autodesk here, so it starts in February. And going back to so we had two months in the first quarter, but as as it that was a new model, we needed another quarter to see the full effect of the program. So now we are in a position to provide you with a fair number.

27:25 Okay. And the practical effect is what? Is it the lower kickback for you, or what is the practical effect? Yes. It's a lower kickback. And it's dependent on several factors. It's just not just the not just the percentage. It's our ability to new sales, reaching different targets, and then you get certain kick backs. So it's a live model. Yes. Okay. I see. And then also on design, comps get much easier now, of course, in Q3. But do you still stick to your CMD comments from September last year that '26 will deliver low single digit organic growth in design in '26? Or should we see that as history now? I think we discussed this, the last event as well. Yes, we still believe that we're going to have organic growth in q four and we're going to see that in q three and we're gonna see that going forward.

28:13 So that has not changed with this change in margin. So we still believe that we are in a low low point with regards to renewal cycles, meaning that from now, it should become better. And you will see that in Q3 and you will see effect in Q4 and you will also see that in 2027 as this is sort of a low turning renewal rate. That means that 2027 will see ourselves in a better position as well. Okay. But there is a risk that twenty six full year will be a slightly negative number, I guess, Will? That might be, yes, for the full year. But going forward from now, you will see organic growth in this merger. Okay. Clear. Clear. And then also the final one on the sign, customers buying more one year licenses same as Q1. Is it because there is an Autodesk push pushing them to do it? Or is it because they want to do it for different reasons?

29:13 There are two reasons. One is that if you remember the discussion about the early renewals, that was driven by that the customer can't renew certain contracts as a free year. They need they must renew it as one year. So one third of the three year contracts cannot be renewed as three year. So it will be automatically be renewed at one year contracts. So that's a driving force. So I think that's sort of the most predominant force that we can see to who drives it. And then you don't have any sort of incentives. Historically, you have the financial incentive for renewing as a three year contract, basically meaning a discount. There are no discounts on three year contracts compared to one year contracts. The benefit that you get is that you lock the price for three years.

29:59 Yeah. Okay. I understand. That's clear. Thank you very much. Thank you. The next question comes from Daniel Gerberg from Handelsbanken. Please go ahead. Thank you, operator. And hi, Johan and Kristina. Hi, Daniel. A couple of questions from my side as well. Starting off, a question on design. Have you seen any implication or on the revenues by any changes in revenue model from Autodesk going, you know, away a little bit from seat based into more value based models? Or or is it too early to to see anything from that?

30:46 We have a part of the when we sell to our customer, we sell subscriptions and we sell consumption based tokens. So we already have that mix in our net sales. And percentage wise, we can see a higher growth in the consumption based token model. So that means that basically customer a normal customer buys a certain amount on a subscription and then they top it up with the tokens, basically the consumption base for the less users of the systems to get a good mix of for them. Okay. And would you say that the net effect to the year over year is with regards to total revenues, is it like down, flat or up? Or just to understand the No. It's it's not down. So we can see that it's it's been moving and we so we could we can't see the negative effect of that from the model. Then sometimes the customer can go up and down depending on how many users they have. So that follows more that for the Perfect.

31:56 And also on the restructuring program or optimization here in in design. How I guess, we need to reduce some people also. It will also impact the sales and the R and D organization some or it's mainly admin, etcetera, but but We're doing it for two reasons. So it's a very good question. One is the obvious that we have had a very rapid growth in Symmetry for the last five years. I think we are almost tripled that sales in five years period. And if you go back three years ago, we didn't have any operation in The US. So it was time for it to realize these synergies. And you will those synergies, you will find mostly in sales administration delivery, not so much in r and d because that's a focus area going forward necessarily to drive organic growth.

32:54 So it means and in in and in that sense, the second part that we're doing is that we are transforming some of the sales operation moving from more of a renewable based sales to more of an offensive new sales. So it's a mix of realizing the synergies from the rapid growth and also shifting some of the sales efforts, for example, to new sales efforts and making sure that we can also get our new products and services to the market. Perfect. And my last question would be a little bit on communication governance and so on. And we have, as you actually showed, a really good EBITDA CAGR of 90% last ten years, but shares now down like 75% in twelve months and so on. And what could you have done something different to mitigate this effect some and also how to improve market trust in your operations going forward?

33:54 Thank you, Daniel. It's a very good question. We can definitely do more of the communication and provide more data and more confidence for the future. So it's an ongoing discussion. Yeah. We'll stay tuned. Thanks, Azul. Thank you. The next question comes from Thomas Nielsen from Nordea. Looking at your balance sheet, have SEK2450 million of net debt. You also have SEK $542,000,000 of contingent considerations. Binding this, we would have net debt, including contingent considerations of about SEK 3,000,000,000.

34:43 And when comparing this to your rolling twelve month EBITDA of SEK $995,000,000, this would put net debt to EBITDA, including contingent considerations, at around 3.0 times, which is above your financial target of 2.5 times. So could you perhaps talk a bit about what are the covenants on your bank debt? And did you see any scenario where you would perhaps need to raise more capital given the balance sheet and how it's structured? Yes, I'm taking that question. So we have regular covenants in our banking facilities that we are aligned with. So that is not a problem. And also these continued liabilities are to our the previous sellers of the companies.

35:33 They are not interest bearing in that sense, so not included in the reported net debt of EBITDA. So concluding on that, we are in line with our covenants and also including the continued liabilities. Okay. Thank you. The next question comes from Fredrik Nielsen from Redeye. Please go ahead. Thank you. Hi, Johan and Kristina. I wonder about your own software in Symmetry.

36:20 How closely connected is the sales process of your own software to the sale of an Autodesk license? Thank you, Fredrik. Yes. It is it is connected because that also what brings value to the customers. Seeing the customers see that we are able to use our knowledge to invest in software that provides value on top of the Autodesk platform that we are selling. So, yes, it's very much connected. But having said that, we are also selling software separately as well to different customers. But it's connected, it's part of the offering and it's usually bundled to our customers in the sales process. Okay. I see. Thanks. And I know you might not be willing to disclose this figure, but looking at the three year deals and there's no major benefits of it left basically, is it approaching a very, very low share of sales? Could you perhaps give some flavor on that?

37:28 No. The short answer is no, it's not a low percentage. It's still a major part a big part of the sales that we are doing, but it's a portion that are decreasing over time, but it's still a significant part of the business, the three year deals. I see. That's clear. And last question from me. Aerospace and defense in PLM continues to grow well. How large is it as a share of PLM today? And what's the growth rate approximately? If you add aerospace together with defense, it's then you have to add what we're doing for the civilian part as well. It's almost 15% of the the PLM division, one five, and it's a growing part. And we are providing both the platform and services, and it's also the base of Dassault Systemes, our partner. They actually started as the CAD department in Dassault Aviation some thirty years ago and has developed from that. So it's a platform that is broadly adopted and used in aerospace aerospace and and defense. And we've been working with customers since basically since the foundation of Techne in '94.

38:40 Great. That's all for me. Thank you very much. Thank you. The next question comes from Michael Lassine from DNB Carnegie. I have a couple of questions. The first one is if you can explain the difference between renewal based sales and new sales. What changes do you need to implement to optimize that I mean, that organization and the focus on renewals or, sorry, on new sales force. Thank you. New sales is going after new customers, new selling them the new platform and also to existing customers selling them new modules.

39:34 So renewal, that means basically that what we sold a year ago or three year ago, we would like the customer to renew that. So that means that we are striving all the time to automate as much as possible of the renewable sales, both in how we go to the customers and how we do the administration of that. So it's a constant effort to automate that. And if we automate, then we have resources that we can invest in the organization to drive new sales. So that's basically the move that we are going for. Okay. And and how long does it take for you to be aligned with this new incentive structure? We are already in most of the parts we are up and running. So we are probably a little bit we have so we will see effect of this in the second half of this year.

40:33 Okay. All right. And then I have a follow-up on this mix shift between one year and three year contract duration for the design segment. Can you maybe repeat and clarify this underlying trend towards more one year contracts? How fast this could develop and the magnitude? And if you can grow organically despite going towards more short term contracts? So I think just to add to what Kristina described earlier, you can see in the water flow between the quarters, you had roughly 12,000,000 of the negative organic growth that was related to the shift from three to one year contracts, to give you a magnitude of it.

41:28 Okay. So that's this quarter. But going forward, what is this the run rate that we should expect or will it accelerate? And what is sort of the end state here when this is sort of more in balance? What do you think? We don't believe that the three year contracts in the near term will cease to exist and not be part of the offering. We still believe that it's gonna be part of our our offering. But what we can see is that there's a shift from going from one point of three year contracts to another. So it will not disappear. We can see the shift. And right now, we can see that one third of the as I described earlier, we will one third of the contracts will probably move away as they cannot be renewed.

42:15 So we will see a shift on that going forward. Okay. And this is sort of a baked into your plan to grow, EBITDA over time, and and so you will manage this despite this Yes. Dynamics. Yep. We truly believe that. And we have shown over the year that we have a really adaptive organization who can handle these things that we have done the last thirty years. So we truly believe that. Okay. Thank you. There are no more questions at this time.

43:09 So I hand the conference back to the speakers for any closing comments. Thank you all for listening to our presentation and all good questions. And Thank you.