Dustin Group AB (publ) (DUST.ST) Q4 2026 Earnings Call

0:00 Welcome to the Dustin Q4 presentation for 2025-2026. During the questions and answers session, the participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the CEO Samuel Skott and CFO Julia Lagerqvist. Please begin your meeting.

0:22 Good morning everyone. Welcome to Dustin's As you heard, I'm joined today by our CFO, Julia Lagerqvist, and together we will take you through the highlights of the quarter before opening up for questions. I'm pleased to report improved profitability in the fourth quarter, where we saw the full effect of the efficiency measures implemented earlier in the year, while we continued to sharpen our commercial focus. Net sales declined in the quarter with organic growth of minus 5%. The development mainly reflects orders brought forward earlier in the year in the second and third quarters, particularly within the public sector. On the other hand, we first noticed in very many quarters saw growth in the SMB segment. In total, the organic growth adjusted for the discontinued consumer business was minus 3%.

1:19 The gross margin increased to 13.2% compared to 12.7% last year. And this higher margin is mainly explained by higher price levels, continued efforts to improve profitability in our customer contract portfolio, and a more disciplined approach to new businesses. Adjusted EBITDA increased to 110 million compared to 83 million a year ago. The improvement was mainly driven by the stronger growth margin and the lower cost base following the efficiency measures implemented. The adjusted EBITDA margin increased to 2.3% compared to 1.6% last year. Cash flow from operating activities amounted to minus 204 million SEK compared to minus 73 million SEK last year.

2:07 The leverage measured as net debt to EBITDA, it came in at 2.8 times compared to 4.81 times last year and continues to stay within our target range. Also, the board proposes no dividend to be paid for the financial year on. If we then go to the next slide, talking about the incident we had early in Q1. As we communicated already early in September, we then identified not right access to certain internal items. We acted immediately and proactively shut down systems to protect our IT environment and minimize the impact on our customers.

2:52 External cybersecurity experts were engaged and the relevant authorities were known. We were able to restore the order flow within a few days, followed by our websites and customer portals for order handling just a few days after that. And since the 10th of September, our operations have been fully restored. The forensic investigation and data analysis are now largely completed. Some remaining work is still ongoing, but a significantly lower level of activity than during the initial phase of the incident. The findings from the incident will be taken into account in our ongoing work to even further strengthen our security and resilience. And by this, I hand over to Julia to give you some more details on our financials.

3:37 Thank you, Samuel. If we then move to page 4, we will look more closely at the LCP segment of large corporate and public customers. The sales in LCP was 0.7 billion second a quarter, or minus 4.5% versus last year. The organic growth was minus 3.7%, so basically 0.4% this quarter. The decline was, as Samuel said, mainly driven by lower effects in the public sector, where orders had been brought forward for Q2 and Q3, driven by the impact of the importance and customers wanting to secure volumes and prices. And we did not see that same effect in this quarter. The opposite for our corporate customers, we saw more stability. They've also made some choices to prioritize margin over volume, especially when pricing has been so volatile. This has resulted in lower sales inputs.

4:29 We also saw growing demand within our lifecycle services. As said before, we can see large volatility in sales between quarters in ACP due to the large order surges. On the positive side, it was margin improvements in the previous year which helped offset the volume decline. The margin benefited from a more mature contract portfolio as well as higher market prices. A slightly more selective approach to the new business also benefited from margin developments. And this, together with the implemented efficiency measures, helped improve the bottom line versus last year, leading to a segment result of 87 million SEG versus 80 million SEG last year. And the segment margin ended at 2.4% versus 2.1% last year. Then we moved to the SMB segment of H5, where sales landed at 1.1 billion SEG, or 5.7% below last year. And organic growth was minus 6.1%, so very little voice at the end as well. Adjusted for the basic energy, however, the organic growth was plus 3.4%, so encouraging to see growth in the B2B in late August in this segment again.

5:36 And we see some signs of stabilization in the market, mainly in the Nordics, where the hardware and software business continue to develop positively and remain the key focus area going forward. The growth is, of course, important. And the gross modeling continued at the similar solid levels as in Q3, supported by the higher market prices and continued strength prices this week. And the ongoing pace of the non-standard services, which we discussed last quarter, which then burned accountability, is starting to deliver costly effects for the bottom line. Efficiency Measures. And all in all, this led to an improved segment result, which landed at 47 million sex versus 34 million last year. This corresponded to a segment margin of 4.2% versus 2.9 last year, so a clear improvement.

6:28 The cash flow for the period was minus 291 million versus minus 1.2 billion last year. And then last year was impacted by the repayment of debt with the right issue. The cash flow for competitiveness before net earning capital changes was plus 168 million. A clear improvement as of last year, given by the operational result. On the opposite, the effect from net-to-hear capital was clearly negative, minus 370. This was driven by two main effects. First, the normal seasonality that we see in Q4, and also that Q3 was initially low. I will talk more about net-to-hear capital on the next slide. and many related to development of different IT platforms. And the cash from financing was at normal levels and mainly leasing, while last year was then impacted by the repayment of the information.

7:21 So even though the cash was negative this quarter, it was positive for the full year, and this year the reason for this is that it landed at 2.8. A clear improvement versus last year. It was higher than Q3 due to the increase in capital. It was expected and is the normal trend for past the given scenario for capital. But still in line with the target range between Q3 and Q3X for the third consecutive quarter. A network capital landed at 167 million SEK, and improvements last year were at a high of 177 million SEK. Inventory dropped to just above 1 billion SEK, which was lower than last year's Q3, and now close to the target level of 1 billion SEK.

8:08 Thank you very much. And we always have some timing effects between individual quarters, but our long-term target remains to be around minus 100 years. And with that, I hand back the word to Samuel.

8:40 Thank you, Julia. This is a year where we've taken several important steps to build a new and stronger Dustin. We're now fully focused on B2B customers with the phase-out of the consumer business. We've implemented a new sales organization with peer local accountability, strengthening local market execution and customer engagement. We continue the transition towards a more standardized and scalable service offering with improved profitability based out of non-standardized services. Our organization-wide efficiency measures have been completed and are now delivering annual savings of approximately 8 million SEK, contributing to a structurally lower cost. Through these actions and through a lot of hard work by the team, we have been very near able to deliver organic growth, improve profitability, stronger cash flow, while also significantly strengthening our overall financial position.

9:38 And if we then go into the next slide and talk a little bit about the future. So looking ahead, the market remains dynamic and to some extent uncertain. Continued component shortages are expected to drive further price increases and impact product availability also in 2027. Higher prices are expected to wake workplace demand, while the rapid development of AI is creating new opportunities to drive demand for updated IT infrastructure. Against this backdrop, our priorities are clear. We will continue to strengthen local market execution, being close to our customers and partners, and be able to focus on the opportunities lying ahead.

10:24 We will drive profitable growth in S&P, leverage our strong position in the Nordics, and utilize our full service offering in that segment. We will complete the phase-out of non-standardized services to improve profitability, maintain a strong pricing discipline and continue to drive efficiencies across the organization. At the same time, we will continue to work closely with our customers and suppliers to manage component availability and changing pricing dynamics. Finally, we plan to host a Cavalier Markets Day on the 25th of January, where we look forward to providing a more detailed update on our strategy and long-term vision. And with that, we'll open up for Q&A.

11:10 If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Jesper Stegemo from Handelsbanken. Please go ahead.

11:30 Yes, good morning, and thank you for taking my questions. So, a couple from me, and I start on this IT incident. And given that you didn't comment on any potential sales impact for fiscal Q1 here, I guess that you have limited loss on, yeah, from this incident. How should we do?

11:55 Yes, that's the short version. I would say, I mean, we obviously, like Samuel said, we will have impact on the lost sales days in September, so we basically were closed. But we don't do this for the quarter.

12:10 Okay, so you don't have any estimates that you could share with us?

12:16 No, we are still assessing the full effects of it, and we will come back to you when we close the Q1. Okay, I understand, that's fair. And on the Volgum side, then...

12:37 How do you look at demand for next fiscal year one? You highlighted some volume pressure given higher prices. It appears that both IDC and some other global vendors are also expecting some double-digit decline in volumes for 2027. How much do you think price could compensate for top-line versus volume loss? I think it will be challenging to drive the road for the next year.

13:12 So if I'll comment on that. Yes, I mean... If you look at what the market consensus is, and if we look at the research houses and also the vendors, the expectation is that there will be pressure on demand on pieces next year. But on the other hand, prices will continue to go up. The exact balance of that outcome, I think, is too early to tell. But yes, we also expect some way on demand on the pieces side. On the other hand, We are seeing a kind of recovery in the SMB segment. One quarter of underlying growth. It's too early to say everything is great and will continue to grow, but at least it's in the current kick sign.

14:04 And then, yes, we see a way of demand, but on the other hand, AI is driving increasing demand when it comes to the infrastructure part all across the hardware, software and services. So I think it's several different things happening at the same time, which is both kind of a bit of a headwind in terms of PC demand, but also opportunities in SMB and infrastructure driven by AI.

14:37 Okay, thank you. And on LCP, given the somewhat lower sales from the public sector, could you just remind us how much the price is as a percentage of LCP?

14:51 I would say it's around one-third.

15:01 One-third?

15:02 Yeah. Yeah.

15:05 Okay, thank you. The next question comes from Daniel Thorsen from ABG Sundahl Collier. Please go ahead.

15:18 Yes, thank you very much. First question on LCPT. What is the pipeline, the rollout schedule for the coming quarters here? And any comments on maturity degree for the contracts as well?

15:33 So... In general, we don't guide about the pipeline and the future, so no comment on that. Of course, we can see, as we talked about, that some contracts are a bit more mature compared to a year ago, for instance in Belgium, and that's why we see improvements there. But naturally this is an area where there will be seasonality effects between the quarters. But I think also commenting in general, coming back to the previous question, what do we expect? We do expect some pressure on demand on PCs, but as we saw in Q4 and something we will continue to prioritize is not only the volume but the value side of things where price increases are expected to continue and where we will continue to focus on driving margins.

16:29 Thank you very much.

16:50 Okay, perfect. And then on this margin here, the higher gross margin, is that potentially a result of lower proportion of PC sales in the quarter due to lower volumes? Or in the other explanations you already mentioned here?

17:31 I would say it's mainly the other explanations. We don't see that big of a mixed effect here in terms of the product base. It's again coming back to having a more mature contract portfolio on the public side and shaping some of the deals with really, really low margins. And then on the SMB side, it's related to the pricing as well.

17:56 I see, I see. And then the third one, I guess that some of your inventory that was delivered or sold this quarter was perhaps purchased earlier at potentially lower prices. What's kind of the current status of your inventory today? Will that have a negative impact on gross margin in the coming few quarters?

18:15 No, I mean, we don't guide for the future on this one, but no, I don't expect any negative impact on the margin. If you want, I would say it would still rather be a positive impact.

18:28 Just a final one on central costs, then. You're just right that there is a positive one-time effect in the quarter here, and in magnitude, or is it just a few million seconds?

18:37 It's just a few million seconds. More to indicate that this is not sort of the going level I would have with my model going forward, but we've had some positive corrections and accruals at the end of the year, basically.

18:51 Okay, perfect. Thank you very much. The next question comes from Thomas Nielsen from Nordia. Please go ahead.

19:03 Thank you for taking my question. When it comes to Benelux, when you say Benelux still lags the Nordics operationally, what milestones should we watch over the next 12 months to see if the new regional organizations...

19:24 I wouldn't say it lacks anything operationally in that sense. It's a different... I mean, the starting point in the business models are different. If we look to Nordics, we have a much higher weight on SMB because that's where we came from. Whereas in Benelux, it's more a large enterprise and public company. So it's different kind of different business dynamics and different starting points. If we take Belgium, we can already see that we are growing and we are growing with better margins because of the contract maturity and that's something we expect to continue. In the Netherlands, we are still, I mean, it is still a challenging market, highly competitive, high price pressure. And there, as we talked about, we very recently launched a new locally focused organization.

20:12 We also now have a strong local leader in place. So we will work with that setup now to make sure that we improve day by day. Some improvements, especially on the networking capital and cash flow, has already been made, as we I think from an operations standpoint, we're fairly stable. Now it's much more about the go-to-market, the trust with the customers, getting that momentum going for the future.

20:49 More active customers, higher spending per customer, price increases, and are you seeing any increases in active customers?

21:00 I would say we see all of the things you mentioned, but of course, even the price increases we've seen, that is the main driver, but we also see volume increase in SMB, so it's not the only price increase.

21:19 Okay, thank you very much. Thank you. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Martin Wallstrom from SB1 Markets. Please go ahead.

21:48 Any impact on inventory build-up or something in the next quarter?

21:54 No, we have not seen that. If I should add anything on the cost implications, we obviously have some water costs that we were handling in terms of external support, etc. That will be taking us... But no impact on inventory that I can speak of.

22:13 I would say it's mainly seasonality effect, so nothing larger than that. I think if I talk a little bit in general on the different product makeshift

23:08 Thank you very much. Thank you very much. Thank you. Of course, that will be a little bit of a headwind. I think, let's be honest about that. But still, with that, there is also opportunities.

23:55 We see continued price increases, and that is an opportunity. We see the recovery opportunities in SMB, and we see the increased demand in infrastructure. So I think that's what we're seeing, that's what we expect, and that's forming our priorities overall. And then maybe if you want to comment on the geographies,

24:15 Julia. I mean, look at the sales development in the Q4. It's also a lot linked to the different market interests that I talked about, the volumes that were forward in previous quarters. All the deals that were on the table. So maybe not that different market dynamics, more sort of different business management, I would say, so really different markets. But I guess we could say, in general, as I said, Nordics is a bit more stable than maybe the Netherlands, but we still have a cost of development in Belgium, which I imagine is a big issue to take with us.

24:51 Yeah, great. And then one final question, I don't know if you can take out something from that line,

25:11 I mean, it's not about sizing down, right, the organization. That we have implemented now, then going forward, will be an ongoing decline, we'll say, of this business. We haven't really guided on the size of the savings. I wouldn't say it's not large amounts, right, for us in that sense. It's in the single digit, I would say, in fact, per quarter.

25:41 That's still progressing according to plan and I think also we talk a lot about top line and market development which is of course extremely important. But I think also important to note is our focus also on the gross margin, the pricing discipline, utilizing the price increases and making sure we do the right deals. So that's also a focus area and then of course and other global areas even further down in the P&L where we have the efficiency measures and efficiency will continue to be a priority going forward. So our ambition is, and what we've been able, I think, to demonstrate over the last quarter is that, yes, the market is dynamic. It's a bit uncertain in some areas. There are opportunities.

26:30 There are no more phone questions at this time, so I hand the conference back to the speakers for any closing comments. Thank you. So thank everyone for listening in. Thank you for the question, the fourth quarter presentation and Q&A. Wishing everyone a great day. Bye.

27:53 and many more. Good morning everyone. Welcome to Dustin's presentation of our fourth quarter and full

30:49 year results. As you heard, I'm joined today by our CFO, Julia Lagerqvist, and together we will take you through the highlights of the quarter before opening up for questions. I'm pleased to report improved profitability in the fourth quarter, where we saw the full effect of the efficiency measures implemented earlier in the year, while we continued to sharpen our commercial focus. Net sales declined in the quarter with organic growth of minus 5%. The development mainly reflects orders brought forward earlier in the year in the second and third quarters, particularly within the public sector.