CombinedX Q2 2025 slides: organic growth declines despite Align acquisition

Introduction & Market Context

CombinedX AB (CX) shares tumbled 10.28% to 38.4 SEK on Thursday after the Swedish IT consulting firm presented its Q2 2025 results, revealing a 6.6% decline in revenue despite its recent acquisition of Align (NASDAQ:ALGN) Consulting. The results, presented on July 17, showed mixed performance with improved margins but concerning organic growth figures.

The company’s platform-centric strategy, which focuses on building specialized expertise around leading software platforms, is being tested as the broader IT consulting market faces headwinds. CombinedX’s acquisition of Align Consulting represents a continued commitment to this approach despite the challenging environment.

Quarterly Performance Highlights

CombinedX reported Q2 2025 revenue of 234.8 million SEK, down from 251.2 million SEK in the same period last year, representing a 6.6% decline. Organic growth was even weaker at -7.5%, compared to positive organic growth of 2.1% in Q2 2024. Even after calendar adjustments, organic growth remained negative at -6.4%.

Despite the revenue decline, the company managed to slightly improve its adjusted EBITA margin to 7.6% from 7.2% in the prior year, with adjusted EBITA reaching 17.9 million SEK compared to 18.2 million SEK in Q2 2024.

As shown in the following chart of quarterly financial results, the company’s adjusted EBITA has fluctuated significantly over time:

Looking at the longer-term trend, CombinedX’s last twelve months (LTM) revenue reached 928.0 million SEK with 10.5% growth, though organic growth for the same period was negative at -5.7%. The LTM adjusted EBITA margin stands at 8.7%, still below the company’s stated goal of reaching 12% in the next 12 months.

The revenue development over the past several years shows the impact of acquisitions on overall growth:

Strategic Initiatives

The acquisition of Align Consulting represents a key strategic move for CombinedX. Align, a consulting company specializing in IFS business systems with operations in Norway and Sweden, had a turnover of 88 million NOK in 2024 with an impressive 25% operating margin and 20% organic growth.

CombinedX is paying 113.75 million NOK for Align, with one-third paid in newly issued shares and two-thirds in cash. An additional 56.25 million NOK may be paid depending on Align’s profit growth during 2025-2027. The acquisition is expected to contribute positively to CombinedX’s EBITA margin and earnings per share.

The company’s platform-centric approach is illustrated in its organizational structure, which groups specialized consulting units around specific enterprise software platforms:

CombinedX has outlined several strategic and operational initiatives to address current challenges, including focusing resources on the right submarkets with appropriate offerings and implementing measures to increase sales and consultant utilization while balancing costs.

Detailed Financial Analysis

The company’s employee metrics reveal both challenges and efficiency improvements. CombinedX ended Q2 2025 with 559 employees, down from 595 in Q2 2024. Despite the headcount reduction, revenue per full-time equivalent (FTE) increased by 3.9% year-over-year to 1,737,000 SEK. However, personnel costs per FTE rose at a faster rate of 7.3% to 1,109,000 SEK, putting pressure on margins.

The following chart illustrates these employee metrics and their impact on efficiency:

Cash flow analysis shows a significant deterioration in Q2 2025, with the period’s cash flow at -49.5 million SEK compared to positive 13.5 million SEK in Q2 2024. This decline was primarily driven by investment activities of -67.7 million SEK, likely related to the Align acquisition.

The company’s cost structure relative to revenue is shown in the following breakdown:

Despite the negative cash flow, CombinedX maintains a relatively healthy balance sheet with liquid assets of 75.2 million SEK at the end of Q2 2025. The company’s net debt to EBITDA ratio stands at approximately 1.0, well within its target of around 2.0.

Forward-Looking Statements

CombinedX maintains its strategic goal of reaching 1 billion SEK in revenue by 2025, combining organic growth and acquisitions. The company aims for organic growth to exceed the IT consulting market growth rate, though current performance is falling short of this target.

The long-term vision includes developing eight "Leading Brands" by 2028, each focused on specific platform expertise. This strategy is designed to create clear value propositions for clients while building specialized competencies that command premium rates.

The company has set a target of achieving a 12% adjusted EBITA margin in the next 12 months, which would require significant improvement from the current 8.7% LTM figure. Management is implementing both strategic and operational measures to reach this goal, including focusing resources on higher-margin platform services and balancing costs across the organization.

While CombinedX faces challenges with organic growth, the acquisition of Align Consulting and its platform-centric strategy represent a continued commitment to building specialized expertise in high-demand enterprise software platforms. Investors will be watching closely to see if these strategic moves can reverse the negative organic growth trend in coming quarters.

Full presentation:

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