Zalaris Q2 2025 presentation: Revenue up 12%, strategic review concludes with raised targets

Zalaris ASA (OB:ZAL) reported strong second-quarter results on August 29, 2025, with double-digit revenue growth and record margins, while also announcing the completion of its strategic review and raising long-term financial targets.

Quarterly Performance Highlights

The HR and payroll services provider delivered a 12.0% year-over-year increase in revenue to NOK 362 million for Q2 2025, while first-half revenue grew 14% to NOK 732 million. The company achieved all-time high Q2 margins, with adjusted EBIT reaching NOK 44 million, representing a 12.1% margin – an improvement of 3.3 percentage points from the same period last year.

"We are delivering strong growth across our business segments while simultaneously improving margins and cash flow generation," said Hans-Petter Mellerud, CEO and Founder of Zalaris, during the presentation.

As shown in the following chart of quarterly performance metrics:

Managed Services, which represents 77% of total revenue, grew by 15.4% year-over-year to NOK 280 million. This segment maintained strong customer relationships with a Net Revenue Retention rate of 103% in constant currency. Growth was particularly strong in the UK and Ireland region, which saw a 26% increase, while the DACH region (Germany, Austria, and Switzerland) and Northern Europe grew by 14% and 12% respectively.

The following slide illustrates the consistent growth in Managed Services:

Meanwhile, Zalaris Consulting revenue increased by a more modest 1.6% year-over-year to NOK 82 million, with growth primarily coming from APAC and Poland, partially offset by reductions in the DACH region and UK.

Strategic Review Outcomes

A key announcement in the presentation was the completion of Zalaris’ strategic review, which resulted in a decision to accelerate the company’s current strategy rather than pursue acquisition offers.

"The strategic review has been completed, and we’ve decided to accelerate our current strategy to maximize shareholder value," explained Mellerud. "We rejected acquisition proposals as they undervalued Zalaris’ performance and potential."

The company reaffirmed its global ambition to become a top 3 global multi-country payroll and HR transformation provider, with plans to deepen its SAP partnership and leverage AI and proprietary intellectual property. Zalaris also emphasized its focus on European-hosted solutions tailored for local compliance requirements.

Detailed Financial Analysis

Zalaris reported significant improvements in profitability and cash flow generation during the quarter. Adjusted EBIT increased by 55% year-over-year to NOK 43.9 million, with the Managed Services segment contributing NOK 47.7 million (up 43%) and Consulting adding NOK 4.6 million (up 70%).

The following chart illustrates the company’s EBIT performance:

Operating cash flow saw a dramatic improvement, increasing to NOK 61.9 million compared to NOK 18.4 million in the same quarter last year. This enhanced cash generation allowed the company to pay a dividend of NOK 0.90 per share (totaling NOK 19.6 million) while still strengthening its balance sheet.

As shown in the cash flow development chart:

The company’s financial position continued to improve, with net interest-bearing debt reduced to NOK 217.1 million, down from NOK 225.6 million at the end of the previous quarter. The leverage ratio (NIBD/adjusted EBITDA) decreased to 0.8, reflecting the company’s strengthening balance sheet.

Zalaris also announced it is reviewing its capital structure and debt financing alternatives ahead of the first call date for its existing bond at the end of September 2025. This review aims to minimize financing costs, enable dividend distributions and/or share buybacks, and secure necessary funding for continued growth.

Growth Initiatives and Future Outlook

Perhaps the most significant forward-looking announcement was Zalaris’ raised long-term targets. The company now expects to reach its NOK 1.5 billion revenue target for 2026 one year early and has set a new goal of NOK 2 billion in revenue by 2028, with an adjusted EBIT margin of 13-15%.

The following chart illustrates these ambitious targets:

To achieve these goals, Zalaris outlined three key growth initiatives:

1. Becoming the preferred partner for multi-country payroll and transactional HR services to the mid-market

2. Implementing a "land and expand" strategy combining Consulting and Managed Services capabilities

3. Pursuing automation, AI, and X-shore initiatives to drive scale and margin improvement

The company also highlighted significant contract wins during the quarter, including new long-term agreements in the Nordic region that will add more than NOK 30 million in annual contract value. These new contracts, along with previously signed deals, are expected to add approximately NOK 75 million in annual recurring revenue once fully implemented.

"Total annual revenue is expected to increase by approximately NOK 202 million, or 15%, versus fiscal year 2024 by Q3 2026, based on already signed contracts," noted Gunnar Manum, CFO of Zalaris.

Zalaris shares closed at NOK 79.80 on August 28, 2025, down 0.25% for the day. The stock has traded between NOK 65.20 and NOK 88.00 over the past 52 weeks.

Full presentation:

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