Earnings call transcript: Admicom Q2 2025 focuses on AI and growth strategies

Admicom Oyj reported its Q2 2025 earnings, highlighting a focus on innovation and strategic growth amid challenging market conditions. The company maintained its financial guidance from January, with a keen focus on expanding its AI capabilities and adjusting its billing model. The stock saw a slight decline of 1.15% in pre-market trading, reflecting cautious investor sentiment. According to InvestingPro data, the company’s shares are trading near their 52-week high of €65.76, with a market capitalization of €305.17 million.

Key Takeaways

• Admicom launched an AI chat interface for construction site operations.
• The company maintained its financial guidance amid a slow market recovery.
• Organic ARR growth was minimal at 0.2% quarter-to-quarter.
• The Finnish construction industry’s growth remains sluggish, impacting Admicom’s performance.

Company Performance

Admicom’s performance in Q2 2025 was marked by a strategic emphasis on product innovation and organizational restructuring. Despite a challenging environment in the Finnish construction sector, Admicom enhanced its product offerings with the launch of an AI chat interface and continued to pilot AI features with several construction companies. The company is positioning itself for future growth by focusing on a unified platform experience and merging its Finnish subsidiaries into a single entity.

Financial Highlights

• Adjusted EBITDA: 32%
• Organic ARR Growth: 1%
• Quarter-to-quarter ARR Growth: 0.2%
• Negative recurring revenue growth

Outlook & Guidance

Admicom is targeting €100 million in annual recurring revenue by 2030, with expectations for modest growth in the second half of the year. The company is implementing a new billing model for its Ultima product, set to roll out within 12 months. Despite maintaining its financial guidance from January, the company is cautious about the slow market recovery and increased competition. InvestingPro analysis indicates the company maintains a strong financial health score of 2.62 (GOOD), with sufficient cash flows to cover interest payments and moderate debt levels.

Executive Commentary

CEO Simo Leste emphasized the company’s proactive approach in the current market, stating, "We are not making any hesitant moves, too big of a risk moves in the market." CFO Sattu Helamo highlighted the importance of self-driven growth, noting, "It’s motivating to have the growth in our own hands so that we are not just sitting and waiting for the market to start helping us."

Risks and Challenges

• Market Recovery: The slow recovery in the Finnish construction sector poses ongoing challenges.
• Increased Competition: Admicom faces heightened competition from smaller players.
• Revenue Growth: Negative recurring revenue growth could affect future performance.
• Market Confidence: The construction sector’s low confidence levels in the EU may impact Admicom’s growth prospects.

Q&A

During the earnings call, analysts inquired about the details of the new billing model and the challenges in acquiring new customers. Executives addressed market recovery expectations and discussed ongoing mergers and acquisitions, as well as internationalization strategies.

Full transcript - Admicom Oyj (ADMCM) Q2 2025:

Simo Leste, Group CEO, Admicom: everyone to Admicom’s Q2 Interim Report Webcast. My name is Simo Leste. I’m the Group CEO of Admicom and I’m here with Sattu Helamo, our Group CFO. So, today, we’re going to look into our Q2 report. And in the agenda, I will start with a couple of customer cases and I will also speak about our recent AI development.

And in the beginning, you saw our most recent video of our Bauhab product, which we’re super proud of. And we will speak about our kind of like customer cases also related to Bauhab. And I will also give you a little bit of update on how we progressed with our strategy execution during Q2 and then Sato will take us through our Q2 financials. And also, she will help us to understand a little bit the dynamics of the rest of the year and our outlook for the remaining of the year. But let’s start with the customers.

We have had a fairly good uptake in the new customer or new sales and customer acquisition. We got plenty of new customers. And here are some of the highlighted customer cases. So, first of all, we have gotten some new Ultima customers. And typically, the customers are looking for more integrated solution to manage their Construction business, ease in the administrative burden and help them to understand better the data and the financial status of their business to make better decisions and build better.

As mentioned, we also have had a good uptake in Bauhab customers. We have had recently, for example, Respect Projekt and Respect Talotech onboarding on Bauhub platform. And what is specific about this customer is that they are also users of Vision, Tempo and Ultima. So, and more customers are relying on multiple of Admicom’s products to help them to be more productive. So, we also have new customers who we have acquired with not only one product, but from the start relying on multiple ones.

So, Sacko Parte OU, a family run company who wanted to take more digital capabilities to help them to grow faster and run their business more efficient onboarded on Ultima and Quantima platforms. And also, have had many AI functionalities in customer pilots and we are co creating those together with our customers. And I thought it might be interesting for this webcast to dive deeper into a few use cases that we have been developing. So, we have been mostly focusing on helping our customers to build better and run their construction site operations more effectively by using AI. And the use cases we have been piloting with 10 customers in Finland are around the construction site operations.

So, what we have been building is AI chat interface to communicate with multiple of our products to help them to maintain and update the information, automate the reporting and communication of the status in the construction site. So, for many construction site related activities, there are many different kinds of reporting requirements to the residents of the buildings, to the owners of the buildings and so forth. And we have been helping to automate the reporting of the status of the project. So, it means that the chat interface is automatically collecting information both from the schedules and the documents of the project to help them to compile automatically reports and status of the project. One other important topic is the Construction business is moving from project based business to a process based business.

And this means that also the tact within which the construction sites are being managed is moving to from a week or day schedules to four hour or even hour tact schedules. So, it is paramount to update the information from the construction sites all the time in a real time manner. So we have been helping the construction site managers to update, for example, the readiness or completion status of the construction site by using the chat interface and in the future also by using just the voice interface. So, you’re able to communicate with the chat interface saying that, hey, completion status of this particular process date is now complete and the chat interface automatically updates the scheduling tool in the background. And also, we have been helping our customers to gain access to multiple different regulatory compliance or safety instructions, because at the sites, you need to have many kinds of answers to questions related to safety requirements or other regulations and this has been also helpful to our customers to access information in real time from the construction sites with a very easy interface of using the Chat dot ai.

And we have now more AI features in piloting in Q3. We will be extending the pilot to 15 construction companies. And also, we’re starting to commercialize these products into our production products and also then we’re able to bring them to all of our customers during the autumn. So, we’re super excited with the development of the AI. And also in parallel, we have been running the research process, so that we are all the time gaining more understanding of what are the problems worth solving for the construction companies to be able to be more productive in the future.

So, more to come during the year. And I will just give you a quick reminder of our strategy and then also a few highlights in how we have been progressing with the strategy execution. So, our vision stays the same. We want to be the first choice of partner in the European construction software ecosystem. And our mission is to help our customers to be more productive than their peers by bringing them the comprehensive AI enabled platform, delivering them a superior customer experience and also making sure that our own employees are feeling the good employee experience.

We want to be present in the numerous markets in the European construction software markets and we want to be the best workplace for the people who love construction and want to help the construction companies to be more productive with the digital capabilities. So, we want to help our customers to build better together with them and we want to aspire the €100,000,000 ARR by year 02/1930. And also during this year, we will be giving more details around the plan of €100,000,000 how we will break that down to different execution priorities and how to make it happen. We have now ramped up the operating model that we launched in March and we are now fully in function with this operating model. And this gives us also the platform that we can use for accelerated growth.

This gives us more clarity around how we lead the business, how we run the business. This gives us more abilities to leverage our full product portfolio in the platform strategy that we’re now building in the future. This gives us more focus on the accounting service that we have within the business and this gives us more focus into our internal operations through the business enablement, the functions, meaning the finance and IT and other functions, how to support the business moving forward. Also, this is what we call the platform for international expansion that we can then use in the coming years. And also to run the business, we have now been able to get the team fully in place.

So, have a new member of the leadership team joining us in September. I’m very, very excited to give you a little bit of more introduction to Henna Kottileinen, who will be joining us in September as our Chief Strategy Officer. So, Henna is joining she’s joining us from KONE, where she has been leading some of the KONE transformation and strategy planning and execution. She has a very robust background both from being in an in house role of strategy planning and execution, but also looking at the strategies from a consulting perspective. And she will be instrumental in driving forward our strategy in our international expansion and also to accelerate our inorganic growth opportunities in moving forward.

And we’re super excited to have her in the team and starting in September. So, a few words about our strategy execution. We have been mentioning in our last webcast that we have been dividing our strategy execution into seven different execution streams and I will give you just a few highlights of what we have been doing in the Q2 to make this strategy real. So first of all, in our growth acceleration, we have been now assigning territories to our salespeople, so that we have approximately half of our salespeople focusing on new sales, new customer prospects and half of our sales force is focusing on helping our customers to utilize our platforms and to also look into the cross sell opportunities. So, we have customer success and account managers looking into our existing customer base.

And we have now the full Finland market territory split into the new customer, new sales roles and these account management roles. So we have a very good coverage of the market and ability to start accelerating the Finnish market growth. We have also established new teams to ADMICOM. We have a group wide customer experience team who have now ramped up and their responsibility is to make sure that the communication flow from us and the information about the usage of the platform is being also utilized in ensuring that our customers are getting the benefits and the value from using the products that they are currently using to make sure that their productivity and their value from the products is being delivered. And also, we have Marketing fully ramped up and delivering great results.

You saw the video in the beginning. I’m very proud of that Bauhu video. And also, we have renewed our web pages, so that you can see and explore our portfolio and the products and more customer references much more easily than before. In the internationalization, we have been exploring a few markets in more detail. We have been conducting customer interviews to understand the dynamics of the market.

And we have been learning that each market is very different from each other and we’re very, I would say, very humble and very, I would say, planned in our execution of the internationalization and no decision has been made in broader market expansion, but we’re planning and doing the groundwork to be able to set ourselves in a position where we can truly start to accelerate the international growth also through different kinds of organic growth activities. And of course, Henna now joining us as the Chief Strategy Officer, she will be responsible for these activities moving forward and helping us to create the strategy and internationalization playbook moving forward. The unified platform experience has been moving forward as well. In our interim report, we explained about the invoicing change in the Ultima and accounting service platform and business and Sato will be giving you a little bit more color to what that means in practice to our customers and to our business. And also, have been starting to look into more customer centric view into our platform development.

So, we have been exploring the customer workflows and what are the problems we’re solving through the customer lens that we can then reflect to our platform strategy moving forward. It means looking at capabilities that we have today, which we need to bring more stronger to our customers and looking at the capabilities that we need to augment and complement into our portfolio as well. We also started an interesting pilot with our customers where we take customers who are not using digital capabilities today and we will be giving them all of Admicom products and we help them to get into the best practices of building better and we are then measuring the productivity improvements that we are able to get through helping the customer to onboard into digital construction. So, more information about that pilot in the future during this year as well. And also, of course, the extensive AI development is part of this unified platform experience execution stream.

In our target operating model, we are well on track with our company mergers. So, we are merging our subsidiaries in Finland into one entity, which will help us to be more simple in our operating model and also it will improve our customer experience as well. In the equity story and incentives, we have been renewing our short term incentive program to reflect better our targets and strategy execution to key employee short term incentives. And in the culture, we have done a lot of work in the culture side. So, we have been defining target culture for ADMICOM, where we are one ADMICOM all working together.

We have been looking into our role framework, so what roles and responsibilities and different kinds of career development opportunities we can provide within Admicom. And also, we have been looking into our leadership culture as well. And in the accounting service of the future, we have been appointing new leader to our accounting service. Katarina Lahresnemi is now leading our accounting unit. And we have also started to look into different kinds of development activities to improve the customer experience and help the accounting service to be more automated, to be more efficient and also to work closely together with our customers in helping them to build better.

And of course, all execution must lead into results, and this is a great segue to our Q2 financials. So Sattu, over to you.

Sattu Helamo, Group CFO, Admicom: Thanks, Simo. Throughout this year, we have been seeing the construction industry market trending in the right direction, but the pace of the market recovery is extremely slow. So the latest statistics shows that in May, the construction industry revenues in Finland grew by 0.3. And the average growth in the first five months of 2025 is about 2%. So when we consider how low the comparable figure to these growth rates is, we can barely talk about growth with these numbers.

And if you think about the positive impacts that the market growth will bring to ADMICOM, we need much higher growth figures in order to start actually realizing those positive impacts. One interesting statistics from a couple of weeks ago was the Confederation of Finnish Industries Business Confidence Study. And in that study, it showed that the Finnish construction sector ranked the lowest of all EU countries. And the confidence had gone downwards a little bit from the previous study. So we are not yet waiting for the market improvement to start pulling our business.

Instead, we are focusing on what we can do. So all our focus is currently in the actions that are in our own hands. And for example, the billing model change related to Ultima and accounting is one of those actions. And we are trying to do the best possible performance in this very tough market situation. One clear highlight from our Q2 is that we have been progressing very well with the billing model change related to Ultima and accounting.

So we will be gradually phasing out from the annual adjustment fees, and we will be replacing that with a rolling revenue based billing model. I will come back to that change later when we talk about our guidance and especially the themes affecting our guidance this year. We have made some modification to those themes. This year, however, we are still facing annual adjustment fees. So we are invoicing them as previously.

So once a year, we do this adjustment fee calculation for all our Ultima and accounting customers. And five months after their financial year has ended, we invoiced the annual adjustment fee based on their actual revenue. And as the construction sector revenues have been declining and the revenues in our customer base have been declining, the decline in annual adjustment fees now has a negative impact in our growth this year. So in the second quarter, about 400,000 less adjustment fees than in the same quarter last year. The operating model and the organizational changes that Simo already went through, they have affected our sales performance in the second quarter.

Our sales teams delivered about 4% higher sales bookings than a year ago. It’s growth, but it’s less than what we were targeting for. So we have seen some slowness caused by the organizational changes. And obviously, the tough market has not helped either in the sales performance. For the first time, we have over 20% of our customers using more than one ArtemiCom product.

And this is a really important KPI for us. We follow it on a regular basis. Our productivity promise to our customers is based on the assumptions that the customers are using digital tools more widely. So more than one of our products should be in use for them to realize the plus 25% productivity target. We are seeing currently a steady growth in the product penetration rate.

It’s not fast yet, but with the new organization and with people dedicated to the current customer sales, so upsell and cross sell, we expect to see this KPI improving faster in the future. In the second quarter, we had a fairly decent increase in the customer amount. So the net new logos increase was almost triple compared to Q1. However, the deal sizes for these new customers are fairly low. And when compared to the customers who are churning us, the new customers are bringing less monthly revenue than the churned ones.

So this is a factor that is also impacting our growth rate. In the first quarter, we reported a huge number of insolvency related churn, so 70% more than a year ago. In the second quarter, the insolvency related churn was a lot less. However, there were other reasons for churn in the second quarter and our rolling or the last twelve month churn rate remained at Q1 level. And finally, profitability, 32% adjusted EBITDA in the second quarter.

That was in line with our own plans. So we landed at the targeted level. Obviously, the annual adjustment fees, when they melt down from the top line, they have a direct impact also on profitability. So the impact of the declining annual adjustment fees was about 2.4 percentage points. In growth, we had an impact on the annual adjustment fees.

The ARR growth was impacted about 2.3% and recurring revenue and revenue growth were impacted a little bit more. So if you look at the organic growth in ARR, we had about 1% organic growth, but in recurring revenue and revenue growth, the organic growth was negative this quarter. In the adjusted EBITDA, we have and also in the total revenue growth, we also have the effect from the decision that we made in Q4 last year to start ramping down the external software services business. So that has impacted our EBITDA by about one percentage point. So if you exclude the sort of the one off impacts of annual adjustment fees and the external software services revenue, our adjusted EBITDA would have been about 35.4%.

And the decline in profitability is related to the investment phase that the company was in throughout 2024. Here you have some more granularity to our Q2 financials. One thing that I always want to remind our investors about is the fluctuation between quarters. So if you look at the adjusted EBITDA, we have almost 32% higher profitability in the second quarter compared to the first quarter. So this relates to two factors.

One is the annual adjustment fees, which we recognize as revenue when they are invoiced and majority of those were invoiced now in the second quarter. And on top of that, we have the holiday season. It has started in Finland, so that has a positive impact on the personnel expenses. In EBIT, our EBIT decline is about 200,000 higher than the decline in EBITDA And that relates to the fact that we are not an IFRS company, so we recognize amortization to our goodwill, which has been generated in the past company acquisitions. And in Q4, we acquired Bauhop.

And for that reason, we have about 150,000 more goodwill amortizations on a quarterly basis. In the first quarter, we had quite high increase in the headcount. And now if you look at the second quarter number, we have come down by 12 employees. There are various reasons, so it’s a little bit like multiple reasons here and there. One reason for the change is that in Q1, we had some overlaps with people who were leaving about to leave the company and people who had been recruited to replace those people.

So this is a good development for us. We have 12 people less in the headcount. And when we released our Q1 results, we were explaining that the personnel expense into the future should not be calculated with that high increase in the employee account amount. In ARR, we are currently at the same level as we were in Q4. Now the majority of the negative impact from the adjustment fees is in and our growth expectations this year are towards the end of the year.

So in the second half, we have some price increases for some of our products taking place. And now on top of that, we have the billing model change, which we will start rolling out in Q4. Quarter to quarter, our ARR grew by 0.2% and the negative impact from the adjustment fees on a quarterly growth was minus one percentage point. In our ARR bridge, I would draw attention to the down sell figure. So if you look at the down sell for the first half of this year, it’s 1,800,000.0 compared to 2,700,000.0 for full year last year.

And if we split €1,800,000 between first two quarters, two thirds of the down sell came in, in first quarter and one third in the second quarter. And the biggest driver for the downsell has been the contract updates for our Ultima and accounting customers. So as the customers have made new estimates of how their revenues will develop this year, they have updated their contracts to reflect the new estimated revenue. And we expect to see a lot less of those going into the second half because of the billing model change and the fact that we will start looking at the historical revenue rather than the customers’ forecasted revenue. And then finally, our financial outlook.

In today’s release, we maintained the financial guidance, which we issued in January in relation to our Q4 results, but we have adjusted and modified the themes affecting growth a little bit. So first of all, our original estimate about the annual adjustment fees this year was €700,000 And based on our latest forecast, we expect them to be slightly higher, somewhere between 800,000 and €1,000,000 Our quite wide range in ARR growth guidance was originally based on the uncertainty related to the market recovery and the speed of the market recovery. After the first half of the year and what we see from the statistics and economists’ sort of estimates, we no longer expect the market to recover fast enough so that it would help us in the growth this year. But instead of that, we are very excited that we can today inform and announce about the Ultima billing model change because that will be a factor that will boost our revenue from the last quarter onwards. And the amount of how much it will impact our ARR depends on how fast we can roll out the new model to our customer base.

We are still making plans on that. We have about onethree of customers who will be moving or transitioning into the new model in Q4 at this stage. And now a little bit more about the billing model change. I think this is something that will be very interesting for our investors and hopefully a very positive thing. So in a nutshell, what we are doing.

So in the current model, we have had this one off large invoicing to our customers almost one point five years after the revenue has been generated by our customers. So instead of this one off invoice, we are transitioning our customers to a model where we monitor constantly their rolling twelve months revenue and we change their monthly fee based on the historical rolling revenue. So the customers’ monthly fees will change on a monthly basis instead of high one off invoices once a year. When we were assessing the change and planning for the change, we were very clear about the fact that we want to maintain the revenue based model. So that was something that we did not want to give up.

Instead, we wanted to create a model that has less negative impacts and less sort of like administrative burden related to it. In the current model, it’s heavily post cyclical. So when the construction industry is going up, ADMICOM’s revenue goes up almost year and a half after the cycle has turned. And the same applies when the industry revenues are going down. The annual adjustment fees have also been sort of a surprise element both to our customers and our investors.

They are hard to predict. And when invoices have been issued to the customers, it has led to a lot of like customer communication, even negotiations in some cases, even when we have a contractual right to do the billing. If If you consider ADMICOM’s product portfolio, this current billing model has been very difficult from the perspective that if we want to bundle our products together, this kind of a billing model is really difficult to bundle with other products and find a suitable billing model for the bundling of the solutions. So that has been one key reason why we wanted to move out of it. And as said, it’s operationally heavy.

It also decreases the comparability of Admicom’s revenue against our competitors and peers. So the objectives for the new billing model, one key objective is that we want Admicom’s revenue development to follow the construction industry cycle. So if the construction industry is growing, Admicom’s revenue is growing and vice versa. We want it to happen almost in real time with the industry. We also want the billing to be much more predictable to our customers so that they do not face a surprise one off large invoice at one point during the year.

And we also want the predictability for our investors. This has been a topic that has been discussed in all our quarterly releases, all our investor meetings throughout the years. So it causes sort of an uncertainty also with the investor base that we want to remove. We believe that when the customers’ monthly invoices change gradually over time and the changes are small, it also creates much better customer experience than the current model. And when we finally have transitioned all our customers into the new model, so when the rollout is done, we will have much more better comparability against the competitors and peers with the new model.

I think that concludes our presentation. Q and A, I guess, Yes,

Simo Leste, Group CEO, Admicom: absolutely. Thank you, Sato. Very clear message and happy to share the renewed billing model for Ultima. And you’re able to send questions through the webcast link and we have some questions already submitted. But why don’t we kick off with some of our dear analysts in the room?

So let’s head off to questions first from the room.

Daniel Le Biste, Analyst, Danske Bank: Thank you, Sima. Thank you, Sato. Daniel Le Biste from Danske Bank. A couple of questions, maybe on this change to the market commentary in your guidance that the market recovery having no significant improvement to the growth in 2025. So could you dissect this wording a bit in the sense what the significant improvement means for you, especially in terms of new sales growth if we compare to the current low to mid single digit level where you have been in the previous quarters?

So what is the range here for the significant improvement?

Simo Leste, Group CEO, Admicom: Yes, I can take you through that. First of all, reminding our dynamics of Agnicom business and the market growth. So we have three main monetization models. So we have one, which is based on number of projects that is the Bauhoop, for example, monetization model. We have a monetization model that is based on number of users, so how many people are doing cost estimations, project scheduling or other project management or planning related activities.

And third one is the revenue related component in Ultimine accounting service. So, whenever the market is growing, the market is seeing more projects, the customers are having more people to working on project planning and project execution and the positive revenue growth also contributes to our top line growth, like Sattu mentioned. So, we are heavily dependent on the market dynamics. And our original expectation was that we’re going to see in the first year half a positive turn. So, we’re seeing the bottom of the industry revenue volumes going down.

And during the second year half, we’re going to see an accelerated growth in the volumes. Now, based on Ragenufteolus, the construction industry of Finland based on the statistics Finland estimations, we’re not going to see that high acceleration of the market turn in the second year half. And to us, it means that we will be seeing double digit positive changes month over month. That’s where the real recovery starts to happen. For the past one point years, we saw negative month to month changes of minus 10%, minus close to 20% changes.

So before we can start to really recover from those very low volumes, we’re not going to see a significant change in our business performance. So like I mentioned before, now the rest of the year, end of the year, will be more depending on our ability to execute the things that we have now planned for the remaining of the year. Whatever comes as a positive from the market starting to recover, it’s all positive on top, but we can’t rely on the market change because all the indicators are showing that they’re not going to massively or significantly recover. And I will touch on one question here already that we had a quote in our release that was saying that the proposal book is kind of like a record high, but the order book is record low. What does that mean?

Well, it means that our customers are starting to see more requests for proposals, requests for new projects to be initiated, but they have not converted into projects yet. So there’s an expectation. There’s a ramp up of certain plans getting reinitiated, but they have not yet converted into projects.

Daniel Le Biste, Analyst, Danske Bank: Okay. Maybe if I sort of work this differently. If the new sales growth without the adjustment fees has been something like 3% for the beginning of the year, it’s my estimate. But would you consider doubling this in the second half to be significant? Or do you expect like double digit growth to be too significant when it comes to the new wording?

Simo Leste, Group CEO, Admicom: Well, I would say that we were not completely satisfied with our performance during the first year half. And we are expecting that the new growth team and the setup that we have, that we have focused for new client acquisition and we have focused on the existing customers will accelerate our new sales for the second year half. So we’re expecting that to grow, but not to double digit levels because of the market conditions not just supporting that at the moment.

Daniel Le Biste, Analyst, Danske Bank: Okay. That’s clear. Maybe on the commentary on these new customers having lower average billing than the exiting ones. Can you remind these reasons? Is it due to the different mix, new customers taking up point solutions, older

Simo Leste, Group CEO, Admicom: customers And the same question came from the online audience as well. The reason is mainly because in the construction industry, when a company is going bankrupt or they are discontinuing their operations, typically, entrepreneurs are still wanting to continue in the business. They establish new companies that have a smaller revenue. They have smaller amount of users.

So, the conversion from a little bit larger customers into new smaller customers is one of the dynamics that is happening at the moment. And also, in the new client acquisition, we are typically serving customers that are at the phase of their business where they are taking on first digital tools. So, they’re replacing the Excel sheets and others with more professional tools. So, they are typically a little bit smaller in size. And also, what we have been seeing is that the larger sales opportunities have been quite slow in converting, but there has been a few of those opportunities that we have been able to win.

But we’re expecting to see more also larger opportunities to convert during the second year half and we have some of those in the pipeline, some which are quite significant in size, some are related to this consolidation of the construction industry. So, when there’s more consolidation happening in the industry, the groups of companies are looking into like consolidated unified digital tool landscape. And these are the opportunities that we also want to win and get Admicom as the preferred tool for those larger groups of companies as well. So we’re expecting the average deal size to improve and increase towards the second year half from the named reasons.

Daniel Le Biste, Analyst, Danske Bank: All right. Thanks. Final question from my end, Maybe a short clarification regarding the annual adjustment fee guidance uplift. Was this due to the announced billing model change or due to more precise forecast?

Sattu Helamo, Group CFO, Admicom: Yes. So the forecast for the annual adjustment fees changes every month because we get to see how our customers’ revenues have actualized in the financial year that is ending. So now for the second half of the year, we have almost sort of actual revenues known from the customer base whose annual adjustment fees will be built. So now we were sort of we have enough information that we could adjust the estimation up a little bit. There’s still uncertainty related to that number, and that’s why we have the range from 800,000,000 to €1,000,000

Atter Rykola, Analyst, Inderes: It’s Atter Rykola from Inderes. Let’s talk a little bit more about the Uldemo billing model change. Maybe first, how much you have talked with your customers about this upcoming change? Or is this now coming as new news for them? And what are the customers saying about the change?

Sattu Helamo, Group CFO, Admicom: Yes. So we have communicated to majority of the customers in June. So sort of the first batch of customers who will move into the new billing model in Q4, they received a letter about the change. And on top of that, we have informed other Ultima customers that we have this change coming up and you will be rolled out later. We have received I think yesterday when I asked, we have received three contacts from the customers related to the change.

And two of those have been from customers who received a letter that they will transition later that they would like to transition already. So as of today, we believe that the customer base reaction to the change will be positive. Obviously, there will very likely be some customers who don’t want this type of a change to happen and maybe some uncertainty related to how it will impact the revenue going forward. But we have a clear communication plan for after holidays so that we will make sure that all our customers know exactly what’s happening and how it affects them.

Simo Leste, Group CEO, Admicom: And I would add on to that just a clarification that this is more like a billing cycle change. So we’re basically staying at the same level of MRR, but it’s different invoicing cycle. And then there’s also a question related to other pricing changes that we have been applying. So we have been sending out information about some pricing increases adjustment or adjacent to the billing change, but I would call them like normal annual updates in the prices. So nothing too dramatic, and they are very much in line with our previous price increases that we have been conducting during the previous year.

Atter Rykola, Analyst, Inderes: And about the schedule, was it like onethree of the customers now in Q4? And how’s the rest? What’s the

Sattu Helamo, Group CFO, Admicom: schedule Well, we have the onethree relates to those customers whose adjustment fees have been built already this year. So it’s part of those customers who will move first. It’s the customers who had a fairly low adjustment fee in general, so that they are much easier to convert. After summer, when we have the adjustment fees for almost all rest of the customers built by August, we will then do an analysis of the next batch and then we will start the rollout for them. And probably all customers will be transitioned within the next twelve months.

Atter Rykola, Analyst, Inderes: All right. And then I’m trying to get the clarity what kind of impact this billing change is going to make to your ARR. Of course, there’s going to be those price increases. If you look at you’re still like back behind your ARR guidance now, so you need to make like roughly EUR 3,000,000 to get on the lower end of the guidance. So how much these price increases and billing model change are going to affect?

Sattu Helamo, Group CFO, Admicom: Well, we obviously, we have some internal analysis on that already, but there are still a lot of uncertainties related to that. So until we get the more clarified impact calculation made and we have a more like a detailed plan of how the customers will be transitioning. We will not be disclosing the impact. But the reason why we kept the fairly wide ARR guidance is that it’s heavily dependent on the timing. So for example, if we get those customers who have had fairly big adjustment fees, if we get them in the new model during Q4, it boosts our revenue and ARR this year.

But if we have to postpone them to the first quarter of next year, then obviously the ARR impact also comes late.

Atter Rykola, Analyst, Inderes: And then about churn. You now mentioned that you expect bankruptcies will be higher than expected also in H2, but are you still expecting the churn level will decrease in H2? What’s your assumption?

Sattu Helamo, Group CFO, Admicom: Well, we haven’t disclosed the exact estimation on that. But I don’t think that we will see a big decline in the churn rate in the second half because originally when we made our estimations for this year, we were expecting the insolvencies to start sort of ramping down towards the end of first half. But now we’re still seeing quite significant bankruptcies and also the statistics that are being published from the industry are showing that they are not going down as fast as we were hoping.

Simo Leste, Group CEO, Admicom: I would say we’re not expecting major change to the levels of first year half.

Atter Rykola, Analyst, Inderes: Okay. And now we know that accelerating the growth this year is basically in your own hands and on your own actions. So how confident you are that you’re able to accelerate the growth in H2?

Simo Leste, Group CEO, Admicom: I think we’re confident that we have the right plan. We know the actions that need to execute. Now, it’s more the question of our ability to execute at time at the pace that we have been planning and also make sure that our customers are understanding the change that we’re applying because it all involves also our customer base to really understand the benefits and understand the positives of the billing change, for example. And there was a question from the online that are we expecting some churn uptick because of the billing change? Like I mentioned before, this is more like a billing cycle change, so not a dramatic price increase or anything like that.

And to many customers, this is actually a positive change because there has been quite a lot of unexpected adjustment fee related surprises in the current model and now we’re able to avoid those in the future. So it’s more predictable. It’s more reflecting the real revenue levels and also the administrative cycles, both from the customer side and AdminCom side, they have been quite significant burden for both, so we’re able to get rid of that. And this sort of a billing model is also much more easy to automate in the future and connect to other products that we want to bring to our customers so that we can get more simplified invoicing model. Also, company mergers are aiming towards having single entity, single invoice, single contract for the whole portfolio.

So that’s the direction we’re going.

Sattu Helamo, Group CFO, Admicom: I would say that it’s motivating to have the growth in our own hands so that we are not just sort of sitting and waiting for the market to start helping us.

Atter Rykola, Analyst, Inderes: And last question from me. You mentioned increased competition in the report. So is there something special on that comment?

Simo Leste, Group CEO, Admicom: I would say that in a situation where the market is tough and you’re competing from the same customers, you always get quite aggressive tactics in the competition. Some of our smaller peer companies have been using very attractive price points in attracting customers. We have, of course, the benefit of being able to provide a wider portfolio than the smaller players. And also, we understand that we need to create even more incentives around utilizing our portfolio more broadly. Want to create counter tactics that is helping us to differentiate in the market.

But mostly, it’s because of the increased competition is because we all want to be growth companies. We have a limited market that we are now addressing in terms of new customer sales. So we need to have the right tactics to be able to win the deals. And that’s been the main driver for the increased competition, I would say.

Atter Rykola, Analyst, Inderes: All right. And actually, I’ll just figure it out one more question. About M and A, are you now scouting new targets? Or are you waiting for the new Chief Strategy Officer to start handling

Simo Leste, Group CEO, Admicom: would say that we are continuously monitoring the market. We’re having different kinds of Q and As with different kinds of potential target companies. But we want to create more systematic approach for addressing the inorganic growth, both combined to international expansion and inorganic growth. I think those two will be much combined in the future. And what I want to highlight is that we’re not making any hesitant moves, too big of a risk moves in the market.

We want to be ready when time is right, when the price is right, when the synergies are right, we want to act. So, we want to prepare well and Henna will be instrumental in creating this strategy moving forward. But continuously, we are getting different kinds of opportunities approached to us. So, we’re in a great position in the market that we are recognized as one of the potential buyer candidate, but more systematic approach will be definitely built during the autumn time.

Atter Rykola, Analyst, Inderes: All right. Thank you.

Simo Leste, Group CEO, Admicom: Good. Let’s move into questions from online. Most of these questions have been the same as in the audience here. So, I think we have been able to tackle those. There’s one from Anders.

How much of your 2,030 ARR target do you foresee from coming from clients outside of Finland. So, we will be in the autumn time, we will be providing a much more, let’s say, detailed breakdown of the €100,000,000 ARR target. And one of the elements for that plan is the international part of the business. So today, I can’t disclose any specific number on the international client portion of the 2,030 target, but we will give more information and details around that during the autumn time. And then, there was a question related to adjustment fee change and the increase, which was already answered by Sato.

And there was this question around what are we seeing on the ground level in Construction, this quote related to high offer backlog, but record low order backlog. I could maybe refer to some of the other conversations that I’ve been having. The market is also, I would say, it’s now very differentiated between the companies who are performing excellently and they are growing and the companies who are clearly struggling. So, this is really the market condition where the strongest will survive and even grow in the current market conditions. We see this consolidation in the market.

So, we both see from international investor backed companies consolidating the market on a Nordic level and we see the Finnish companies being consolidated. So, I think that’s one way of the industry to survive when they get more consolidation, they get more, let’s say, critical mass to the companies to be able to create synergies and grow together with a group of companies. And also, what we can see is that the customers want to start using more capabilities in the digital space. I believe that the addressable market will start to expand as the company start to see the value from the digital platforms. We hear and see a lot of the customers saying that they want to be part of everything what we bring to them in terms of digital capabilities because they see that every single place where better visibility, better situational awareness, better control over the projects is helping them to make better decisions.

So, we believe that this product penetration of ours will constantly increase. And of course, we want to incentivize the customers to be able to do that. And I’m really looking forward to this pilot that we have with a few customers where we bring the whole product suite for them to see how the productivity can boost by using those technologies and we will definitely report those findings to the investor community as well. There was also a question related to what is the driving the driver of reducing the average deal size. So, that was already explained.

And there was a question related to price increases. So, the price increases for this year are very much in line with the price increase levels that we had last year, So no major change in our approach in terms of the pure price increase strategy. Good. I think we have all questions now answered. So what I want to thank everyone is to really, really big thank you for this session.

Thank you for your cooperation during my first six months in the company. And like I explained in the CEO letter adjusted or attached to the Q2 earnings release, interim report release, I’m very confident that we are on the right path. Now, it’s more the question of our ability to execute our plans and we will be gearing up towards the end of the year and more exciting information coming out regarding our platform strategy, regarding our AI development and also regarding our growth acceleration. So Sato and I want to thank you all for joining into this webcast and have an excellent summer, everyone. Thank you.

Sattu Helamo, Group CFO, Admicom: Thank you.

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