Earnings call transcript: Admicom Q1 2025 sees stock dip amid market challenges

Admicom Oyj's first-quarter 2025 earnings call revealed a mixed financial performance, with revenue aligning with expectations but challenges in market conditions affecting investor sentiment. The company's stock price fell by 8.44% following the announcement, reflecting concerns over a challenging construction market and increased customer insolvencies. According to InvestingPro data, the stock's RSI suggests oversold territory, while the company maintains a strong financial health score. Despite these hurdles, Admicom remains committed to growth and innovation, particularly through its new AI initiatives.

Key Takeaways

• Revenue met expectations, but the stock fell by 8.44% post-announcement.
• Annual Recurring Revenue (ARR) grew by 5.5% year-over-year.
• The construction market remains challenging, with high insolvency rates.
• Admicom launched a €2.4 million AI research project.
• The company aims to reach 100 million ARR by 2030.

Company Performance

Admicom's Q1 2025 results showed steady revenue in line with forecasts, but a decline in adjusted EBITDA by approximately 5% from the previous year. With a market capitalization of $242.38M and trailing twelve-month EBITDA of $16.18M, the company maintains healthy profit margins. The company experienced a 5.5% growth in ARR compared to Q1 2024, though it remained flat compared to the year-end. InvestingPro analysis suggests the stock is currently trading below its Fair Value, despite the construction market's difficulties, including a 70% increase in customer insolvencies, which have contributed to a cautious market sentiment.

Financial Highlights

• Revenue: Aligned with expectations
• ARR Growth: 5.5% year-over-year
• Adjusted EBITDA: 25.3%, down 5% from Q1 2024
• Recurring Revenue Share: Increased by 1 percentage point

Market Reaction

Admicom's stock price dropped by 8.44% following the earnings call, closing at $43.95, down from its previous close of $48. This decline reflects investor concerns over the challenging market conditions and the company's ability to navigate increased insolvency rates among its customers. The stock is trading closer to its 52-week low of $40, indicating a cautious outlook from investors.

Outlook & Guidance

Admicom maintains a positive long-term outlook, targeting 100 million ARR by 2030 and a >40% EBITDA margin. The company expects market recovery in the second half of 2025 and continues to invest in growth operations and product development. The guidance for total revenue growth is set between 6-11%, with ARR growth anticipated at 8-14%.

Executive Commentary

CEO Simo Leeste emphasized Admicom's commitment to becoming the leading partner in the European construction software ecosystem, stating, "We want to be the first choice of partner in the European construction software ecosystem." He also highlighted the company's focus on developing new technologies to enhance construction industry productivity, saying, "We are ready to invest in developing new technologies to support the construction industry productivity improvements."

Risks and Challenges

• Construction Market Conditions: High insolvency rates and prolonged sales cycles.
• Market Sentiment: Cautious outlook with potential recovery expected later in the year.
• Resource Allocation: Over 20% of employees are reallocating or redefining roles.
• Competitive Pressure: Need to maintain unique positioning in the construction software ecosystem.
• Economic Uncertainty: Broader economic pressures could impact growth plans.

Admicom's Q1 2025 earnings call highlighted both the challenges and opportunities ahead as the company navigates a difficult market environment while pursuing ambitious growth and innovation targets.

Full transcript - Admicom Oyj (ADMCM) Q1 2025:

Simo Leeste, Group CEO, ADEMICOM: Hello, everyone, and welcome to ADEMICOM's q one two thousand twenty five interim report webcast. My name is Simo Leeste. I'm the group CEO of ADMICOM, and this is my pleasure to to be with you now after my full first quarter with the company. And I'm also here joined by Sattu Helamo, our group CFO, with me today.

And first of all, it's great to have all you here, and you have questions and and answer ability in the webcast. Just press the send a question button, and it will guide you through asking questions. So at any time, please post questions, and we will have plenty of time for q and a in the in the end of the presentation. And for Admicom, q one was a little bit of a kind of like a mixed quarter. We had a good sales performance.

We had good progress with our strategy planning and and our execution plan development. But at the same time, the market was quite challenging for our customers, which was visible in the high number of insolvencies, actually very high number. And and also we we saw that even though the market was starting to pick up based on the construction volumes, we only saw a very slight positive increase in the volumes overall. Our financials came out pretty much as we planned, and Sato will go through those in more detail how the q one turned out for our business. And here's the agenda.

I will first describe a few significant customer cases from q one. I will give you a little bit more color to our strategy execution plans, how they have been evolving, and then Sattu will guide you through our q one financial results and also remind you of our financial outlook for this year. And then we will have time for q and a. But like I said, please do send questions as we move along, and then we'll have time for q and a then in the end. And I will pick up the questions from the from the messages that you sent out.

First, let's start with the customers. That's what we're here for. And we had an exciting q one in terms of significant customer cases, and I'm highlighting the ones that we saw as the most representative of the Admicom strategy as we move forward. Overall, we had a a good new customer intake. We got about 30 new customers in, and through insolvencies, we we had more than a hundred customers leaving.

So as a net effect, our customer number grew during the q one. But just to highlight a few important customers and and why they are representative of our strategy. Ralf Ayalin is a customer who has been a long term customer of ours in the estimation and planning side of our platform, but now they also wanted to onboard into our Ultima ERP platform. And the reason was that they wanted to have a a single platform for combining both the project planning capabilities and the financial results so that they're all in in one platform, and they're able to get the full picture of their performance and operations from that platform. Another important aspect of our strategy is that how we are able to broaden our footprint of our product penetration with the customers, and and there we had two great examples from Respect Talotech where they have been a user of multiple of our our tools, and now they are currently users of Vision in terms of the documentation solution, Tempo in the scheduling, and also now Ultima as the ERP.

And, also, Rakenusgran is a great example of ours where the customer truly believes in Admicom's ability to support their business with a very holistic platform approach where they are currently users of our estimation tools, of our of our scheduling and planning tools, of our documentation tools. And and, also, they have been now onboarding into our AI pilot customer program, and, also, they were among the first ones in Finland to start onboarding Pauhub for the project coordination as well. So they are truly kind of onboarding our journey in terms of supporting the customers holistically across their construction project life cycle. Then we also have some interesting other opportunities. Tracking has been in our portfolio for more than a year now, and they are supporting mobile equipment, mobile asset management, tracking, and managing asset maintenance life cycles and also supporting mobile work in the field.

And we were able to win a public tender for in which is one of the public transport companies in helping them to manage their track infrastructure and also their their mobile assets and their life cycle plus their mobile work in the fields. This was a very significant order for us in in tracking the business, and we were very happy happy to have, in a way, a very broad implementation of tracking to help them to manage their assets in their business. And, also, we got an interesting customer from NRC Group where they had their existing estimation tool was going end of life, and they made a public tender or they made a, like, a tendering process in selecting a new estimation tool. And, also, we were participating in that competition, and it was a great example of our ability to win in a very open tender environment, and we were able to win that deal from NRC Group, and they're they will be now onboarding into our estimation tool. And, also, JM is a is a cooperation that has been starting well.

We are working with them in multiple fields of our platform, and we are supporting them in rolling out those capabilities across their Nordic operations. So a great example of our international customer base expanding. So broadening the portfolio use to give and provide more customer value, first, PowerHub customers in Finland, some larger deployments of our platforms, like with the tracking example, and then, of course, having major international customers onboarded as well. Good representation of of our strategy in accent from the customer perspective. Also speaking of customers, we had a great event in bringing together Nordic and and if first of all, in in the first year, Finnish construction customers and ecosystem players to discuss about what will create the success for the next twenty years of construction industry.

And this is where ADMICOM really wants to be one of the leaders of the of the change in the in the industry overall, how digitalization, use of data, use of AI will help construction industry to challenge the conventions that we have today and how we're able to facilitate the conversation among the customers and the ecosystem members. It was a great event. We brought around 300 people across the construction industry ecosystem. Together, we were able to facilitate a nice conversation among the participants around the topics of digitalization, AI, we were able to present some some great demonstrations of our technologies and capabilities. And we're planning on having this as an annual event, the construction industry to to come together and and discuss about the the future of the industry, the the changes that we want to introduce there, and how we can together make construction business more productive and help each other to build better together.

Then a few words about the the strategy execution. As I laid out in the last q four release webcast, I have been working on a plan of a of a sixty day planning cycle, and now we're able to start to describe what changes are we introducing in our strategy execution and in our operating model to support the accelerated growth phase of our strategy. First of all, our vision is unchanged. We want to be the first choice of partner in the European construction software ecosystem. We really want to be the ones leading the whole industry productivity improvements and bring new digital capabilities for our customers across international markets in in Europe.

Our mission is is put into the form of a North Star where we have the five key star kinda like edges where we define what we want to do by 2030. So first of all, we want to make our customers successful in increasing their productivity by approximately 25% compared to peers not leveraging our capabilities in their business. We want to make it work so that it's it's done by a comprehensive digital platform, which is AI enabled, and it gives the capabilities the customers need to support their overall construction project life cycle. We want to provide it so that it it is delivered through a superior customer experience. We know that the construction industry is very, very critical of the ease of use of technologies because the conditions in which our our users are using the technology are typically not very suitable for having a a a small device or a laptop out there, but it needs to be delivered in a way that it's most seamless and easy to use.

And, also, we're focusing on making sure that our employee experience is also superior and and supporting us to be able to deliver a great customer experience. So those two go very much hand in hand. We also want to internationalize our footprint, and I will describe a little bit what we're doing in that area. But the example of the JM customer is is a is a good one in terms of our ability to support international customers and also help us to become represented in multiple different markets and help us to grow our overall addressable market. And, of course, we want to become the best place to work for people who love the construction industry and who love the digital platforms and and use of those.

So Admicom should be the best place to work for those individuals having the the love for those two two areas. And our mission is to help our customers to build better, and we do it together by bringing together the ecosystem partners and the customers and the atomic communes to to create new ways of working and challenge the conventions. And through this, we are aiming towards growing our business to a level of hundred million ARR by 2030, and it's a combination of of organic and inorganic growth that we're aiming towards. So this is our our mission in brief. And, of course, in order to differentiate in the market and and bring those new capabilities, we are ready to invest in developing new technologies to support the construction industry productivity improvements.

During q one, we launched 2,400,000 research project that aims in researching and finding those most prominent use cases for AI and the use of data in the construction industry. We do do it together with our customers and and with the academia in terms of resource research work packages. And and, also, we were able to get 1,000,000 grant from Business Finland to support this initiative. And this is important for our competitive differentiation for enabling us to build the right capabilities in the future to our platform, but also to be able to differentiate internationally with our capabilities and how we are able to embed AI into our platform. We also launched now a new operating model, and this is one of the key outcomes of the sixty day planning that I was leading when joining the company.

And the key highlights of the change in the operating model is that how we're able to turn our focus from being, let's say, very product centric. We used to have a a business unit model which was built around our products, how we're able to turn that into a more customer centric operating model. So the customer centricity is in the core of our new operating model. We also want to make sure that we have a high level of operational excellence so that we're able to create more simplified operating model for more quick decision making and being able to have a higher organizational clock speed as we move forward. And the the the key principles of the operating model is that how we're able to reallocate our resources to the places which are enabling us to move into this accelerated growth phase.

One important being the growth operations where we're allocating a lot more resources in an integrated, efficient growth operations that comprise of our salespeople, of our customer success operations, and our marketing working together to make sure that we have an aligned and effective growth operations supporting our growth initiatives. So this is all about capturing new sales opportunities from the market. It's about enabling more effective cross sells in our existing customer base, and it's also about being more proactive in mitigating voluntary churn. Simplified operating model is also visible in our platform operations where we used to have business units comprising of different kinds of product management and and product development roles. Now we're moving into operating model where we have one product management organization working aligned across our portfolio capabilities, making sure that the portfolio is supporting customers' workflow in an optimal way and improving the the customer and user experience of our platform as well.

We're bringing together also our product development people under one product development organization to make sure that we're able to shift our r and d and product development resources to the places where it makes the most value and where we can drive the most impact into our customers' productivity. We're also bringing our accounting service into a new position in the operating model where it's reporting directly to me, and we're starting to investigate for more value add services in the accounting service, where we can also, through our expertise in the financial management and and payroll management and other aspects of the of the of the service, how we're able to tap that into the ability to support the increase of the productivity, be more proactive in our services and and and being more consultative to our customers, and also to investigate potential new value add services that we can also bring to our customers to build better. And, of course, we need to evolve and mature our internal operations. So we have function within the business enablers where we have the internal functions who are enabling us to operate effectively. We have there the finance, our our people operations.

We have our IT and so on. So, of course, there we want to develop the processes that are needed to effectively support our business, create more automation also internally our operations, and and have development of our processes, systems, and our data, what we can internally share for our business to better lead the business and make better decisions based on the insights that we can get from our our business systems. And then when it comes to leadership, we're simplifying our leadership structure so that we have much more clear roles or responsibilities that helps us then to lead more effectively and and also be be more accountable for the areas of operations for the whole organization. And to reflect this new operating model, we have the updated leadership team structure where I wanted to have a little bit more compressed leadership team where we have more clear roles of responsibilities. So on top of myself and Sattu, we have Pekka Bulkinen leading this integrated growth operations with much more investment now into into the overall growth operations.

We have Teemu Uzitalo as our chief product officer leading the the product strategy of our portfolio across all products and also leading our product management and product support functions. We have Thomas Reihalme, is our chief technology officer leading our product development activities and our r and d in the technology side, And we have our chief people officer, Helena Marikorpe, who is leading our, of course, our people, our our culture, our our support for the for the development of our own people in the in the operating model. And then we have one position open at the moment as our chief strategy officer, which is due to be open for for recruitment and to complement our leadership team in terms of helping us to have a continuous strategy process, look into our inorganic growth opportunities, start start facilitating our our m and a funnel, and also to help us to find new areas of growth and value creation from our customer customer industries. And also alongside with the new operating model, we have now seven critical strategy execution streams that we are aligning ourselves into, and it's focused on the growth acceleration, which means how we are able to turn our new growth operations in being more effective in driving the organic growth both from a new sales and cross sales perspective.

We have an internationalization execution stream where I have put two of our senior leaders to lead our internationalization strategy. So our former documentation business unit leader, Mikko Jarvi, and our Bauhup CEO, Ted Parz, will be leading our internationalization activities. And by the summertime, we should be having more clarity of our internationalization direction and playbook, and then we can start to execute those accordingly. We have the execution stream of the unified platform experience where we are starting to build more and more capabilities where our platform is working seamlessly across the customers' work flows and and and drive synergies from using multiple technologies in our customers' operations. In the Nordic construction forum, we we provided a a nice data point around the correlation between the use of our portfolio more broadly and the customer's ability to drive growth in their business, and and we are truly confident that the use of technology from our portfolio portfolio more broadly allows the customers to operate more effectively, drive more growth, and and also be more productive and profitable.

Also then in terms of our target operating model, there's a lot of things that we need to do from an administrative perspective and from our legal entity structure perspective. So there, we are simplifying our company structures. We're doing mergers of the sub subsidiaries, and we're, of course, driving the the process development and the and the application landscape of of our internal operations. We're also driving a work stream around our equity story and our incentive structure so that when we're looking at the target by the 2030, how we're able to make sure that our our incentives and our our proposition to our investors are aligned, and we can make sure that we're all driving towards the same same outcome and same goal. We also through this one Admicom operating model, we have quite a lot of work to to be done in the culture side, we're able to start culturally, be more aligned in our growth operations, platform operations, and and and operate as a one team.

So there we have a lot of work to to to build the winning culture, build the winning teams, and and foster and develop our talent as we move forward as well. And like I said in the in the last execution stream, we're looking into the accounting service, how that can contribute more value to our customers in the future and help us to kinda, like, drive that target of 25% better productivity for the ones who are using our platforms and services more broadly, what is the role of the account serve accounting services in that in the future. And through this, we're driving our execution towards the target state of 2030 and towards our vision. Okay. This was the summary of from my side, the key customer cases, a little bit of insights into our our strategy execution after I joined the company.

And now let's move into the q one financials, and I'll hand it over to Sattu.

Sattu Helamo, Group CFO, ADEMICOM: Thank you, Simon. So let's first start with the market environment. So as our report header also says, the market continued to be challenging in the first quarter. And even though the revenues in the industry continue to trend to the right direction, the volumes are very, very low and the improvement in the market is very slow. Of course, this is how we expected the market to be at least in the first first half of this year.

But what was a little bit surprising for us in the first quarter was that we saw a very significant increase in insolvency related churn in our customer base compared to compared to q one of last year. Regardless of this, the overall sentiment We are hearing more and more confidence in the discussions that we have with our customers. And obviously, now the latest news about The US tariff policy is creating some new uncertainty in the market. The tariffs do not have a direct impact on our business as such, but obviously we are carefully monitoring the news and assessing the potential indirect impacts that it may have.

Omnicom's performance in this market environment has been good throughout the downturn, but there are some obvious impacts on us as well. On top of the insolvency related churn, we are also seeing prolonged sales cycles, down sell due to workforce reductions, for example. And the pricing of our ERP solution and also our accounting services are based on our customers' revenues. So with the revenues in the industry declining, our fees are also negatively impacted for those customers who are facing facing a decline in their business. We also have this annual adjustment fee mechanism in our ERP and accounting side, which means, in short, that five months after the customer's financial year ends, we review the actual revenue of the customer against the estimated revenue that we have based our billing on.

And in case the actual revenue is higher than the estimated, we then are able to charge the customer an annual adjustment fee. And in case the revenue, actual revenue is lower than the estimate, then we credit the customer to a certain minimum level. In this market environment, the adjustment fee component is also impacted, and we have reflected this also in our full year guidance. We have estimated that this year, the amount of adjustment fees that we will be able to charge will be approximately 700,000 when they were almost 1 and a half million in in 2024. In the first quarter, we were quite satisfied with our sales performance.

The bookings increased by 10% from q one of twenty twenty four. March was especially strong in sales, and we were really happy to end the quarter with with that kind of a sales result. As Simo already mentioned, also the logos developed positively, but where we are still seeing a little bit difficulties is the average deal size, which is not quite where we would like it to be. This basically means that the bigger deals are still fairly difficult to close. We have discussed quite a bit about our quite vast cross sales opportunity that we have with our existing customer base.

And in the first quarter, we had a couple of percentage points increase in the number of customers who are using more than one of our product. And we believe we believe that the the changes that we are now making in our organization and especially in the growth operations, we can further speed up the cross sales going forward. As mentioned a couple of times already, the insolvency related churn was really high in the first quarter. Compared to q one of twenty twenty four, we had actually 70% more churn due to insolvencies. And that was the main driver for our annual recurring revenue to remain flat compared to end of twenty twenty four and also our rolling twelve month churn rate increasing.

The profitability was in line with our plans. In the second quarter, we continue the work to allocate our existing resources more effectively according to the new operating model and in order to support our strategy execution. ARR growth was 5.5% compared to q one of twenty twenty four, but as said, it was basically flat compared to the previous year end, and the the the high insolvency related churn is the biggest driver for us missing our targets for for ARR growth. With revenue and recurring revenue growth, we performed pretty much according to our plans. And the reason for that is that the that the highest spike in churn realized in March, and therefore, it had a larger impact on ARR than on revenue.

Adjusted EBITDA was 25.3, and and that is in line with our plans. Throughout 2024, we were still in our focus for growth investment phase, which means that the that the investments that we made in in that time are now for the first time fully included in our cost base. The share of recurring revenue of total revenue continued to increase by one percentage point. Now that we have taken the decision to wind down external software development services, we are seeing this this number further declining from a very high level it has already been in the past. In our key financials, I guess the most attention now goes to the profitability level, so let's discuss that a bit.

As a reminder, we have a high very high fluctuation between the quarters. Q one and q four are typically the lowest in terms of EBITDA, and second and third quarter are the highest. During second and third quarters, we invoiced the majority of of the annual adjustment fees. And also during the summer months, the payroll expenses are typically lower due to the holiday season. Compared to q one twenty twenty four, our adjusted EBITDA declined by approximately 5%, and the main driver for that is the investment phase that lasted throughout 2024.

And the majority of the investments during that time we have made in sales, product development, and product management. At the moment, we are in the middle of the reorganization. And maybe the one single data point that best describes the magnitude of the change that we are doing is the fact that in this organizational change, over 20% of our employees are reallocating inside Admicom or their roles are being redefined so that their efforts can be best utilized in supporting our accelerated growth strategy or portfolio strategy. And Simo just explained the seven key streams of our strategy execution. And with these organizational changes, we are ensuring that we have enough bandwidth, enough resources, enough expertise around all of these streams.

And and after the changes, we will be better better suited for our accelerating growth phase, and and we'll have also the capability to drive our profitability up again. The headcount increase in the first quarter is quite high if you take that number without any explanation. So it's good to understand that in this headcount increase, we have a few new roles, like the chief product officer, for example. But, actually, majority of it relates to the reresourcing of sales. We said it already in the in the basis of our 2025 financial guidance that we had some some attrition earlier in 2024, and we have now been able to to gap those resource resource declines only in in the beginning of twenty twenty five.

And, also, we have had some in recruitments in our accounting unit, and these are mainly to replace for longer absences. And, actually, the the the FTE for our accounting has has decreased a bit even though the headcount has has increased. So maybe that that gives a little bit more background on the headcount trend. And next, have the ARR trend here, which as said now has a small decline from the previous quarter. And if we go forward to the ARR bridge, you can see the high churn for one quarter compared to the previous years.

The good progress that we have made in cross sales is showing in the upsell figure. And this quarter, the downsell was mainly caused by our ERP and accounting customers who have continued to somewhat update their contracts to reflect the lower revenue expectations that they have for this year. Our ERP customers are also updating their revenue expectations upwards, and actually the net impact for ERP for net for down sell and up sell was slightly positive in the first quarter. And then finally, if we take a short recap on our financial guidance for 2025. This year, we expect our ARR to grow by eight to 14%, and the wide range that we have for our ARR expectation relates to the uncertainty that we have with the market improvement and especially the pace of it.

Total revenue growth is expected to be within 6% to 11%. And in revenue, we will have a positive inorganic impact from the Bauhup acquisition that we made in December. But for ARR, the growth is purely organic as Bauhup was already included in our ARR calculations at the end of twenty twenty four. What hinders our ARR and revenue growth rates this year? Obviously, the market, But also the the annual adjustment fees are expected to decline by approximately 700,000.

And also, we expect about half a million decline in revenue due to the decision to wind down the external software development services that we have had since the ITO acquisition in 2021. The adjustment fee fees and also the the decline in external software development services revenue, they also have a direct impact on our EBITDA, which we guide to be within 20 3136%. And our plans to protect the profitability this year are especially related to the decision to reallocate our existing resources, and also we are continuing continuing to manage our cost base. I think that's all that we had had for the presentation section of this this webcast. So maybe now we move move to the q and a.

Simo Leeste, Group CEO, ADEMICOM: Yes. And it's good to see that we have questions coming in, so I will be also somewhat moderating the questions. First of all, there's a there's a comment regarding the trading statements and and their their visibility, so we'll look into that comment in in our investor relations. But let's start with the questions. Ate Ricola from interest is asking that how satisfied are you with the progress of the Powerhook integration so far, and and what have been the experiences of the first Finnish customers with the product?

And I can take that. First of all, I'm very, very satisfied with the integration project that we conducted with the Bauhup team and and integrating that into our portfolio. We were able to do the market launch for Bauhup one month early against our own original plans. We have been able to start the the customer acquisition. So we have first customers onboarding, and they are starting to use the platform.

And if I put it this way that we have received proactive wishes to be customer references for the platform because of the high level of satisfaction with the with the the platform use and the user experience and and and what capabilities it provides. I think overall in Finland, there is a typical way of building the the construction project so that the the the one commissioning the project provides certain tools for project documentation and and so on. And and and overall in the market, there's a sentiment that this is not probably the best approach. And and these platforms that the the the commissioners are are are providing are not the best for enabling the most effective approach to collaboration and information sharing. So there's a bit of a work to be done in in in defining the optimal project collaboration methods and and how we're able to take the project collaboration away from emails and away from the telephone calls into a single cloud based platform.

And this is what has happened in Estonia, and this is what we're driving in Finland as well. But the first feedback from the customers has been extremely positive. And and also the the the usability of the platform and the user experience, like I highlighted in in the beginning, it has been very, very good. And and and we believe that through that, we can also drive a lot of product related growth momentum. Another question from Ate is related to our personal costs and the number of employees increased in q one compared to q four.

And and excluding a Bauhup, how have you been have you been increasing your recruitments, and what do we believe that the personal expense level will be in the coming quarters? So maybe, Sato, if you can just elude on this a little bit. And, also, there's another question related to this from from Daniel Lepiste from sorry. From you, Kopeka Pesonen, that how descriptive is the q one as a run rate proxy of our overall cost level? So a little bit the same question with different different words.

Sattu Helamo, Group CFO, ADEMICOM: I I can take this one, and I I I believe I pretty much answered the question when going through the financials already. As I said, we have had some additional positions, maybe handful, three to five. Five positions in the first quarter are actually new. All the remaining are pretty much replacements for recruitments that we try to already do in 2024 or recruit replacements for the accounting accounting services. In our personnel cost base, it's good to remember that in q one, we have the full personnel cost from Bauhup in whereas in q four, we had only half a month.

So that's one explanation for the personnel costs increasing faster than the headcount. We are very careful in our prioritizing our recruitments this year. We have identified some some key key roles that we need to fill, but at the same time, we have revisited the recruitment plans that we had in our original short term plan. So I I I don't see that we would have a significant increase in the in the personnel costs going forward. So I guess as a as a run rate, q one is is pretty pretty good starting point, obviously then there's a big fluctuation with the holidays.

And maybe one thing to also remember is that in December, timing of Christmas was very positive from the employee perspective. So we had very long holidays also in in in December, which was a little bit decreasing the personnel cost of of the last quarter.

Simo Leeste, Group CEO, ADEMICOM: Yes. Then also there's a question from from Ate related to the Business Finland funding and how we're expecting to to recognize this in in in this incoming year.

Sattu Helamo, Group CFO, ADEMICOM: Yeah. So maybe I take this one as well. There's a little bit of a we we still have some internal organizing to do around this this project. The the reorganization and the operating model changes have a little bit delayed our our plans to actually fully kick off the project. Obviously, many streams are already ongoing.

In q one, we have split the funding between p and l and balance sheet. So we have a project, AI to AI related project that we have already been capitalizing. So partially, the recognition of the business Finland funding will go netting the the or offsetting the balance sheet figure, and partially, we are recognizing it as income in our P and L. In the first quarter, there was only like, I think, thousand recognized in the P and L, so very insignificant account or amount. And we said when we announced the funding and the project, we said it very clearly that we do not expect this to have an impact on our financial guidance.

So we will be splitting it between balance sheet and P and L, but at the moment, we don't expect it to impact our profitability significantly.

Simo Leeste, Group CEO, ADEMICOM: Great. Then there's a question from Daniel Lepister from Danske that can you elaborate the comment on average invoicing being below average for the new customers? And and does this does this mean that the project management solutions deals are smaller than usually or smaller than in comparison to to to Ultima and ERP deals? And and I I could comment this briefly so that we have seen a number of cross sell opportunities to come in. And, typically, when the customers are adding new project management capabilities to their port portfolio, the individual transactions or the bookings are are relatively small compared to customers who are making a strategic decision to move all of their ERP and accounting services to us.

So at the moment, the the average deal size is trending a little bit lower than our normal run rate, but we do have also larger opportunities in the pipeline. So this in q one, we just saw a little bit of a lower average deal size than compared to a normal quarter, but this is not a trend that we are expecting to continue for a long time. And and we're also putting a lot of emphasis in, especially new sales that we are able to win and and and and make bookings of of these larger ERP accounting services and multiple product deals at once where we're aiming towards having a more significant MRR per deal moving forward. But but in q one, we we did see that the average deal sizes were a little bit lower than our normal normal run rate. And there's a a few questions about the the the growth expectations, especially regarding the ARR growth.

So how are we expecting the most of the growth to happen, and what what is our expectation on the timing? So how confident are we that the growth will accelerate during the year? And maybe, Sato, you can you can quickly comment on on on that part.

Sattu Helamo, Group CFO, ADEMICOM: Yeah. So the as as said in the basis of our guidance, we expect the market improvement to be towards end of the year. And with that, I think it's a it's also our estimation that the the ARR growth will will accelerate towards end of the year. I think we what we are still in progress of planning is the, for example, timing of price hikes that we will do this year. We have started to to investigate the whole pricing model for all demand and accounting, for example.

So timing of those decisions will probably impact impact also the ARR growth timing, but we will share more when we when we have more concrete plans on those.

Simo Leeste, Group CEO, ADEMICOM: And then also, Daniel is is asking regarding the high number of insolvencies and how is our current visibility on on higher risk accounts and how surprising was the insolvency churn in q one from our point of view, and what are we expecting to have for the for the rest of the for the rest of the year or q two. And and maybe just as a generic comment, what I what I can tell is that even though, like, Satu showed that we have some positive, like, plus marks in the in the numbers of volumes, the the the changes are very, very small, and the and the market condition remains as a very challenging one for our customers. So there will be still a high number insolvencies during the beginning of the year. We we already know that, that it will be significant in in in our customer base. And we we do believe that the the trend should be starting to improve towards the second year half.

And and we are monitoring more higher risk customers and and some indications of of of the high risk accounts, but but the number of insolvencies still occurring was was higher than we anticipated in in our original twenty five year planning. Do you start to have something to to to add on that?

Sattu Helamo, Group CFO, ADEMICOM: Well, not not much. Maybe maybe to comment on the visibility of higher risk accounts and and the churn prevention in general, the the reorganization that we are doing is targeted also for that. So so we believe that, especially with the with the voluntary churn, there is still more that we can do in order to to to have a more positive trend on that. We already saw a small decline in the voluntary, so the non insolvency related churn in q one compared to q one of twenty twenty four, but we I I believe that with our own actions, we can we can impact that. I think the insolvency insolvency part is is more more difficult.

So as Simo said, we expect it to continue relatively high at least for the first half of the year.

Simo Leeste, Group CEO, ADEMICOM: And, also, there's a question from Emil Emil from Carnegie that are you gathering feedback from

Sattu Helamo, Group CFO, ADEMICOM: At least I can't hear you.

Simo Leeste, Group CEO, ADEMICOM: Can you hear me now? I at least don't have a mute on.

Sattu Helamo, Group CFO, ADEMICOM: Yes. Your voice suddenly suddenly okay. Apparently, it's only me then. Go ahead.

Simo Leeste, Group CEO, ADEMICOM: Okay. So there is a a question regarding the the the the churn, and are we gathering feedback from customers who are leading Admicom, and how confident are we that churn is purely insolvency related. So we we do make a quite comprehensive clarification of the of the churn and and the reasoning for the churn, and and we we do know what what are related to insolvencies and what are related to purely voluntary reasons for for that. And and like Sato mentioned, we did see a declining trend in the in the voluntary churn, which is a good good sign. We're not at yet the the level what we're what we're aiming towards in the voluntary churn, but but the trend is is towards the right direction.

And the insolvency related churn was significantly higher than we anticipated in in the planning of the year. And and, also, there's a question of is there a need to strengthen the organization further going forward? Currently, most of our planning with the new operating model and the and the and the change in our let's say, in the alignment of the of the resources is mostly around shifting the focus of our people. And like Sattu mentioned, there are a few critical roles that we're still looking into fulfilling, but this is mostly around getting organized around the strategy and and how we're able to get the most return on the investments that we have been making during the last year as an example. So it's more about making sure that we have the right roles and responsibilities, the right targets for the people, and and they're really impacting into our into our results in the right way.

And like mentioned, the the reallocation of our people and resources has been quite significant so that more than more than fifth of our employees are now shifting to the new operating model role. And and then we believe that through that role, they're better better positioned to to help us to to to develop our business moving moving forward. And, also, there's a question related to specifically to the JM account. There will be a more comprehensive description of the customer case coming out, so more details to follow. But currently, they are using our product project management capabilities, but, like I said, more detailed description of that cases in the making.

And and then after asking that, do do we still believe that over 40% EBITDA margin level target is achievable in the long run? And I do believe that. I believe that the the the investments that we have been making are completely investments that are in our own hands to to to decide upon and and and how to allocate those investments. And and if we would have to make a very, let's say, streamlined operating model, we would be able to pivot our profitability levels as well, but we want to enable us to get to that high growth momentum. And this is the reason why we want to make investments into our growth operations, into our product management, and into our product development so that we're able to respond to the higher growth expectations.

And and also our our cost base is by far from being linear to our top line. So as we start to see the growth coming in from our growth operations and and and through the the the sales and and and customer acquisition, we do see that the the the growth leverage the the the profitability leverage is very positive through the growth. So we do believe that the margin levels are still achievable in the long run, and and this is what we're also planning into our mid range plans that how we're able to get the formula for enabling us to get to that target level. Sato, anything from you you would like to add to that?

Sattu Helamo, Group CFO, ADEMICOM: No. I I think you pretty much covered it all. I'm I'm also confident that we can we we will be able to reach that

Simo Leeste, Group CEO, ADEMICOM: Yeah.

Sattu Helamo, Group CFO, ADEMICOM: In the long run.

Simo Leeste, Group CEO, ADEMICOM: And Emil is asking about our our, let's say, customer segmentation, and are we expecting to expand across The Nordics with large customers such as JM, NRC Group, and and are they the are they only customers in Finland? No. They are also customers across their countries where they operate. And, yes, our plan is to expand internationally also with the help of our customers' international operations. And also as part of the internationalization planning, we're also looking into our market entry strategies in terms of organic growth, in terms of looking into inorganic opportunities, but also in looking into different kinds of partnerships that we can use for accelerating our our customer access and our our brand recognition as well.

So more information about the internationalization strategies in our coming earnings calls. And and like mentioned let's see let's see what we have here. So, Ricard. Hi, Ricard. I have a question regarding the upsell, new sell.

On an annual basis, there is a great step up from '20 '4. Any color here in terms of traction in the market and and what is driving this? And and also comment that but there is also a step up on churn down sell on an annual basis. Is there a q one effect here, or how will this develop from here? That will be key here on total level in terms of the growth ambition.

Yeah. So we we definitely see that there is a positive traction in our upsell and cross sell opportunities. We have been mentioning about our our strategic aim of increasing our product penetration in our existing customers, and and this is one part of the growth strategy that we're now implementing. So we will have more people responsible for cross sell with the existing customer base. So definitely, we will expect to see more momentum in that one.

But, also, we will have more people who are focused in driving new customer acquisition and new sales. So we will have more balanced approach in driving both momentums, and and this is one of the main reasons for us to put more resource allocation into our growth operations so that we have more people who are doing the so called account management work of the existing customers, making sure that they are satisfied and they are growing the the the use of our products across the platform. And then we will also have more people responsible for new sales and and driving in positive growth from from that as well. So, yes, we are expect expecting to see higher growth rates in terms of our upsell and cross sell, but it it will not happen by the cost of somehow lowering the focus into into new sales. So we're driving both of these as a moment to moving forward.

And, of course, churn and downsell is a lot driven by insolvencies and the trend for our let's say, the the monitoring of the voluntary churn is is is very, very, I would say, critical point for our success, and and we are driving this also forward by having more people allocated to customer experience where the main target for them is to mitigate churn and to drive positive NRR across our portfolio.

Sattu Helamo, Group CFO, ADEMICOM: Yes. And maybe to add a little bit on on your question about the q one effect. So for example or especially with the ERP solution, it is quite typical to take a new ERP solution into use in January. And that also means that those customers who have, for some reason, decided to leave us, their invoicing ends ends in January, and that also impacts the churn rate. So there there is a q one effect also in the in the numbers.

Simo Leeste, Group CEO, ADEMICOM: Yeah. And then let's take a final final question here. We're starting to be at the top of the hour, and great to see many questions coming in. What is our confidence that the market will recover towards the end of the year? I would say it so that we do have the statistics and the trend that is supporting this to happen like Sattu showed, but I have now met with tens of customers across Finland.

And all of the customers are are kind of, like, carefully being positive about the trends starting to be visible. So the number of tenders coming in, number of projects that they're estimating at the moment, number of projects that have been postponed or delayed are starting to get active again. So there are a number of indicators that are showing that the recovery is starting to happen, but we do repeat still the same message as we have been repeating before that what will be the pace of change in the volumes and and the pace of change in in, for example, demand in the in the in the residential buildings and apartments is still yet to be validated and and and seen how how quickly this will start to recover. But but the the the confidence level is is coming through the customer comments and and through the through the trend that we're seeing in the in the volumes. Great.

Thank you very much for participating. I hope this was a very, let's say, open and and transparent view of our performance after q one. Like I have said before, joining the Admicom team, being let's say, spending more time together with the team and the customers is is still giving me a fairly good feeling of optimism. There is still a lot that we need to see from a market recovery perspective to see the growth starting to to really materialize for our customers. And through that, we see that there's a positive opportunity for us as well.

But mostly, we're now focusing on the things that where we can make a difference, and this is where we can look into our effective resource allocation, making sure that our platform is meeting the customers' expectations and having a great user experience. And and how we can help our customers to build better, to drive the higher productivity is where we see that the long term success of Atmicom will come. But thank you for this, and and I'll see you then latest in the in the q '2 info. But from my and Satu's behalf, thanks for joining in and and listening the webcast. Thank you.

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