Earnings call transcript: Columbus Q2 2025 sees revenue dip, EBITDA margin revised

Columbus A/S reported its second-quarter 2025 earnings, revealing a slight revenue decline and a significant drop in EBITDA. The company’s stock price fell by 0.6% following the announcement. With trailing twelve-month revenue of $239.05M and an impressive gross profit margin of 89%, according to InvestingPro data, the company maintains strong operational efficiency despite current market challenges. The company also revised its EBITDA margin guidance for the full year, reflecting current market challenges.

Key Takeaways

• Revenue for Q2 2025 experienced a slight decline.
• EBITDA fell by 27% from the previous year.
• Contribution margin improved from 18% to 19%.
• Full-year EBITDA margin guidance was lowered to 7-9%.
• Stock price decreased by 0.6% post-announcement.

Company Performance

Columbus faced a challenging second quarter, with revenue showing a slight decline partly due to having two fewer working days compared to the previous year. Despite this, the company managed to increase its contribution margin by one percentage point to 19%. However, EBITDA saw a significant decrease of 27%, when adjusted for extraordinary income in Q2 2024. The company’s cash flow from operations improved by 13%, rising from $16 million to $18 million.

Financial Highlights

• Revenue: Slight decline [exact figure not disclosed]
• EBITDA: Decreased by 27% year-over-year
• Contribution Margin: Increased to 19% from 18%
• Cash Flow from Operations: Increased by 13% to $18 million

Market Reaction

Following the earnings announcement, Columbus’s stock price fell by 0.6%, trading at $1.54. Based on InvestingPro analysis, the stock appears fairly valued at current levels. Trading at a P/E ratio of 25.94x and showing a solid financial health score of GOOD, the company maintains stable fundamentals despite market volatility. The stock currently sits 75% above its 52-week low of $1.30 and 25% below its 52-week high of $2.08, reflecting investor concerns over the revised EBITDA margin guidance and the overall market challenges highlighted during the call.

Outlook & Guidance

Columbus adjusted its full-year 2025 revenue guidance to around $1.7 billion, indicating no growth from the previous year. The EBITDA margin guidance was revised downward to 7-9% from the previous 10-12%. InvestingPro subscribers have access to additional insights, including 7 key tips about Columbus’s valuation and growth prospects. The company remains committed to its 2026 EBITDA goal of 15% and is exploring potential mergers and acquisitions as market conditions become more favorable.

Executive Commentary

CEO Saran Koklusen noted, "We are seeing some indications that the price point of targets in the market is starting to come down to acceptable levels," suggesting potential M&A opportunities. He also acknowledged the challenging market environment, stating, "The strategy is definitely working... But the market is challenging."

Risks and Challenges

• Geopolitical impacts: Varying effects across different markets could affect growth.
• Market challenges in the Nordics: Slower decision-making processes may impede progress.
• Macroeconomic factors: Identified as primary growth constraints by executives.
• EBITDA margin pressure: Revised guidance reflects ongoing financial pressures.

Q&A

During the earnings call, analysts inquired about the performance of the Dynamics unit, macroeconomic factors affecting growth, and the continuation of the share buyback program. Executives confirmed that no significant restructuring costs are expected in the near future.

Full transcript - Columbus A/S (COLUM) Q2 2025:

Conference Operator: Good day and thank you for standing by. Welcome to the Columbus Interim Report Q2 twenty twenty five Webcast and Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there’ll be a question and answer session. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your first speaker today, Zurland Krog Knudsen. Please go ahead.

Saran Koklusen, CEO, Columbus: Thank you very much, operator and welcome to all of you for today’s webcast where we will be diving into our financial results for 2025 and also having a look at the combined first half year. My name is Saran Koklusen. As the operator just said, I am the CEO of Columbus. And with me is Brian Eberson, our Group CFO, who will help me present. So I will start with just a brief overview of the financial highlights.

Then I will follow-up with some observations on market and operational highlights. Then Brian will take over with a run through of the financials in a bit more details and then going to the guidance section and then we’ll finish on a Q and A session. The revenue for Q2 in twenty twenty five actually ended with a slight decline. We’re still seeing some of these challenging conditions, particularly in the Nordic market, whereas our UK and US actually continued the positive trend that we’ve also reported on in previous sessions. It should be noted that there were actually two fewer working days in ’25 compared to ’24 and that obviously impacts the comparison negatively.

Our EBITDA declined by 27% when adjusted for the extraordinary income we had in Q2 twenty four. Overall, this is mainly a result of a weaker top line and also a slightly weaker efficiency in ’25. The contribution margin and contribution margin is higher up in the result calculation. So basically looking at the contract profitability increased with one percentage point to 19% in 2025, compared to 18% in Q2 twenty twenty four. And this is primarily due to further improved project execution, something that we’ve been working on for I’ll say for the past four years.

So we continue that positive development. Brian will cover in his section how each individual business unit has performed on that. The cash flow from operations increased by 13% from 16,000,000 for the same quarter last year to 18,000,000 in 2025. And we think this again underpins the soundness of the business and that we have a very close relationship with our customers, which we are particularly pleased with in a period like this where we’re seeing a little bit more sort of turmoil on the global markets. Last point here, comments on our two business units.

So the runner-up business unit is the second largest and the third largest. And we’ve reported to you in previous sessions that both of these units have gone under different types of restructuring and development over the past years. And this is really working for us. And compared to last year, the same quarter last year, our M3 unit is up 13% in terms of efficiency. So the our ability to sell the hours basically that are available to us.

So 13% is very big increase up to 68% now and digital commerce is up 10 points 10 percentage points to 63% in June compared to June 2024. So these two units have some significant improvements, which you will also be able to see when Brian comments further on the development there. Let’s go to the market and operational highlights. So just to comment on what is on my radar and the rest of group management team. The first point is called scaling our organization.

These quarters are very challenges as we see shifts in the market that are not uniform across the business. So some geographies are fairly unaffected by geopolitical statements. Some are very affected for short term. Some business lines thrive and some less so. So like we’ve done with our M3 and the digital commerce department in the previous years, We are very very keen on sort of pinpoint structure improvements where we’re not just painting across all geographies or all business units.

We’re really assessing each business unit on each geographical level and making necessary adjustments either in capacity or we’re changing the customer focus. We might change some of the profiles that we are hiring. So despite that our team size has gone down somewhat, it’s not because we’re not hiring. It’s actually because we are changing the skill set of the organization to suit future needs. So this is a very important task.

And again, as I say, it’s not something which can just be done with a simple strategic decision, which will then be carried out in each country and in each business line. It really needs to be bespoke for each of them. A comment on AI. So things are developing very fast and we have very interesting projects. So we continue to showcase the possibilities.

We’re running internal programs for further sort of proficiency development, our own staff. We are testing various tools internally as well. It means a lot for our own efficiency. But perhaps the most important one to bring forward is that we’re seeing now a very clear strategy from Microsoft on how they envisage the market developing for what we would call I would call it sort of the simpler end of the capability of the technology. And it’s really about how to completely automate simpler and more repetitive work tasks, very similar to what we’ve talked about for years with just process automation, but with much more contextual understanding.

We have a big role to play there. There’s a huge transformation which is a non technology transformation for all our customers in adopting this technology and basically changing their human side of the organization to embrace this. And this is something we are spending a lot of time on developing our service offering for. Finally, we’ve taken the opportunity after we close down the strategic review to take all the learnings we have from that. We as you know a multitude of dialogues with industry players, financial players and that gave us some inspiration.

So we are giving currently our strategy a mid way health check. We are approximately halfway into our health check and particularly with focus on the top point of this slide, you know, how to scale the organization. We’ve also been doing some further development on our evolve offering. That’s the part which is a recurring revenue and which basically in periods where we’re not doing any major projects for our major customers. This is how we work with them and this is also usually how we secure the next bigger arrangement.

And we want to change some things there and put more emphasis on getting more of this. So more recurring revenue in the future. As I said, also lots of development in data and AI and also a lot of attention is currently being given to updating our understanding of the M and A landscape and the opportunities there. We are still in the situation where we consider the debt level of the company low. We consider the operational cash flow as strong and our ability to obtain further funding is also strong.

And we are seeing some indications that the price point of targets in the market is starting to come down to acceptable levels. So we might pursue some opportunities there. That concludes that and then I’ll hand over to you Brian for the financials and we shift to slide the service revenue for Q2 twenty twenty five.

Brian Eberson, Group CFO, Columbus: Thank you. Thank you, Sjarn. And as always, let me start with the service revenue for Q2 business line. As Sorn mentioned, we saw overall decline in the quarter of 4% and that is only driven by our biggest business lines Dynamics, which saw a decline of 9%. Remember Dynamics count for around 65% of our total revenue.

Therefore, it had a significant impact on the group when they see a decline. On the other side, M3 and digital commerce both saw an increase in revenue compared with the same quarter last year. And that is actually the first time in six months or two quarters that we see that they are returning back to growth, as I mentioned, after some kind of restructuring and shift in major projects and starting up new projects. So, this is a very positive sign in a challenging business environment that we see here. So, that is true, but data and AI had a flat development in the quarter.

If we move to the next slide and our contribution margin, which is the lowest, let’s say profitability KPI for our business lines, We can see that dynamics, so a decline of two percentage points during the quarter. Again, if you have a lower revenue, we did see a lower efficiency, which again means you don’t get our good resources out working on contracts and that impact of course, the business line contribution. On the other hand and goes well in hand with the organic growth that we saw in both entry and digital commerce. They saw a strong uplift in contribution margin entry from 14 to 21% in the quarter and digital commerce from minus 4% to 12%. You might remember that digital commerce went to quite a serious turnaround during last year and especially Q2 last year was hard hit based on that restructuring.

But it’s really good to see that M3 is now getting up in the 20s where they should be, and that is from hard work on strong delivery also to new clients out there. Data and AI saw a dip. It’s minor numbers, so a small impact gives some five percentage points dip, 10 percentage points, mainly due to that they continuously invest in new resources on board that needs some training and some setting up on new projects and that do have a short term cost when you are growing in a good pace. Good, then let’s have a look at the service revenue per market unit per country for Q2. Sweden had a flat development compared to the same quarter last year.

It’s still some headwind over there, but we managed to get them at least on par. And that is an improvement compared to previous quarters where we have seen a decline, I believe, over the last two or three quarters at least. Denmark and Norway has seen a decline in revenue, especially Denmark and Norway where Dynamics is big and is one of the biggest player have had some headwind due to postponement at decision making on new projects. And as Dynamics is fairly big in both countries, it does have a negative impact on the country organic growth development. UK continue, although a bit lower percentages growth pattern.

Believe the last years we have seen strong growth from their side and it’s 2% for the quarter, but we still see some very good perspective over there. And U. S, although on a lower value, saw a steep increase mainly from very strong projects or new projects in our M3 business lines where they start to get a very good and strong foothold. Good. Then let’s move to the H1 or the first June 2025.

Bit the same story dynamics for the first half year decline of 5%. As mentioned before, project hesitations and start hesitations from new projects is seen, especially in Norway and in Denmark, a bit in Sweden. M3, you will see a minus 4% decline in revenue for the first six months. But as I just mentioned, Q2, we do start to see the turning point for M3 after some quarters with shift in projects in this business line. Digital commerce also saw a good Q2, but started the year a bit lower after the restructuring.

So year to date minus 4% growth. And data and AI opposite, they had a strong Q1 and therefore they ended the first half year on plus 13%. On the contribution margin for H1 for the first six months, overall, we have seen a one percentage point increase from 21 to 22% for the first half year. And I’m certain that this is due to the proactive adjustments of our capacity, as Sean also mentioned before, and that is a continuous work. And secondly, strong project execution and therefore a strong and good project margin, which we have a high focus on.

As you will see, if we look at each business line, dynamics, I’ve seen a flat development for the first six months, 24% to 24%, whereas M3 have moved up and especially in Q2 moved up in the to 23% contribution margin, close to Dynamics now. And those of you who have followed it for years will know that M3 have been in the lower 20 of things in the past years. So I think this is a really strong development that we have seen in this business line. Digital commerce is out of the tough times, starting to get up there, not at where we want it to be the same with data and AI, but they are smaller business lines. We do some investments and the digital commercial being through some restructuring, where there was some slip over also in the beginning of this year.

So overall, a very satisfied result on the contribution margin for the first half year And we’re happy to see even in an environment that is a bit tough out there, we see improvement in our basic business capability of returning revenue to even better profitability. Then let me end this slideshow with the service revenue for the first half year for our market units. And again, a bit the same picture headwind in Denmark and Norway both down, especially impacted by the dynamics, project hesitations and then UK and US continue to upwards trend. Not that it’s not a tough market in UK or in US for that sake, but we do see a good traction and some strong wins with our teams in these two countries. And especially UK is starting to get up there together with Denmark size, and they have grown quite significantly the past three years.

So that was all on the specific business line and markets. Then let me finish off before questions with our outlook. As we announced the July 16, as you might know, all of you, we adjusted our margins based on the current outlook and what we see in the market and we adjusted the full year guidance for 2025 to a revenue of a level of around $1,700,000,000 on par with 2024, so roughly a 0% growth. And we thereby also adjusted our EBITDA margin from previously 10% to 12% to now 7% to 9%. We came also with the explanation and small input on that in the July 16 announcement.

Good, that was all for me. For now, then I’ll hand over to the operator and then it’s open for questions.

Conference Operator: Thank you. To ask a question you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question please press 11 again. If you wish to ask a question via the webcast please type it into the box and click submit. Please stand by while we compile the Q and A roster.

Thank you. We will now take our first phone question. One moment please. And your first question comes from the line of Yu Baixu from SEB. Please go ahead.

Wei, Analyst, SEB: Hi, it’s Wei from SEB. Thank you for taking my questions. I have a couple of questions and I’ll do one at a time. Firstly, we’re looking at your dynamics unit and it’s clearly a challenged situation. But can you confirm it is solely driven by a sort of macroeconomic uncertainty rather than the AI disruption or the customer’s concern to use The US technology?

Saran Koklusen, CEO, Columbus: Yes. Okay. Thank you for the question. So, I’ll just summarize. So, it’s particularly to Dynamics, a Microsoft platform and whether the slowdown in growth and in some geographical markets negative growth is caused by anything else than the macro factors.

And that could be this digital sovereignty discussion also you say an AI impact. So let me start with the easy thing. So digital sovereignty is something that we discussed both with Microsoft on how to better segregate the operational environments in the future. And it’s something that customers have an interest in, but it’s not something that has an impact on their decision to engage with the Dynamics platform. To the second point, I think on the contrary, actually the AI the embedding of AI into a software suite like the Dynamics as part of the Microsoft Bisapp suite is very impressive and it’s probably more working to their advantage now.

So it is mainly down to macroeconomics. However, I do also think there’s a fourth element here that could be our internal we’ve grown a lot in Dynamics over the past years and sometimes you plateau on growth. You need to reshuffle your leadership set up like we’ve done for Dynamics and M3. And we are we’ve been working on that for a while and we continue to go through some steps where I think we in Columbus can have a better approach to business development in the market. We’re starting to see some of that come through.

I think particularly The UK market that perhaps goes without saying is still strong. We are seeing a lower growth than we normally see, but it’s still a very, very strong market for us. The Danish market which has had this stock change from growth to some negative growth. We still have a very, very high efficiency on the team. So the profitability is there on the Danish team.

And now we just need to look for these opportunities to start growing Swedish and Norwegian market a little bit more tricky for us and we’re building that there the work process more of sort of really heavy pipeline building. And we’ve been in that process for a while due to the delays. I would like to perhaps say a word about everybody’s talking about this dragged out decision making, prolonging, hesitant in the market. What it actually means for us?

Two examples one for existing customers and one for new. So first for the existing a big part of our business every year comes from existing customers. They then communicate a desire to run a big project that could be an acquisition that needs to be moved on to a core platform or something else. That’s what we’re used to and we’re still seeing that. However, it’s very often when we are communicated a starting date of Q1.

This is without competition that we are already in there. They’re just saying, okay, get ready. We’re going to deliver this. We’re going to start in January. Then nothing happens.

They have to delay it. They have to discuss things in the board. However, what is good for us, it comes back to us six months after. It doesn’t go away. It’s not permanently shut down and most of it comes back just up to at least a half year later than expected.

So we need a much bigger overbooking if you will of our resources. And the other one is for new customers where we typically go through a very rigid competition process against our competitors. We get narrowed down in the field of competitors. We enter into exclusive negotiations. We negotiate the contract perhaps and all of it.

And then suddenly the whole thing is just put on a hold. But they very often come back to us. So we have a number of these things that then come back. And so at the moment it’s about closing that gap in the pipeline to be more overbooked. I hope that answers the first question, Skepp.

Yes, that was very clear.

Wei, Analyst, SEB: Can I follow-up on the auto dynamics in Denmark? There was one of your peer talk about a tougher competition from the international vendors to implement the Microsoft Dynamics for the enterprises. There was they’ve talked about for two quarters. Are you seeing the same thing or you are confident that you are still winning have a good win rate?

Saran Koklusen, CEO, Columbus: So our win rate actually on the dynamic side has actually gone slightly up in this environment. But there are just less decisions being taken. And I do see some competitors. Well, we all we’ve always seen a competitive landscape. I don’t consider the competition to be no worse or less than before.

Clearly some of the more perhaps more distressed organizations will opt for some price decreases in this period of time, but it’s not something that has really affected us. As Brian was just talking about the contract, the contribution margin, stick to the guidelines we have and build these long term relationships.

Wei, Analyst, SEB: Okay, great. And then also on the pipeline, I mean, how’s current trading, if you can indicate a bit, since now you have two months more visibility after closing of the K02? Sorry, can

Saran Koklusen, CEO, Columbus: you just say that again?

Wei, Analyst, SEB: Can you talk about the current tradings since you have two months more visibility now after closing of Q2?

Saran Koklusen, CEO, Columbus: There’s nothing which we can currently report on there and that’s obviously the quarter isn’t closed, but also a month and a half of Q3 has now passed. But those are the summer months and they’re very hard for us to predict on. There’s nothing that has led us to sort of report on extraordinary events.

Wei, Analyst, SEB: Okay, okay. Fair enough. Yes. And then a question to Brian regarding the guidance, EBITDA margin guidance for this year, some to 9%. I realized that you had a sort of a nonrecurring item in Q2, and then you also indicated that it could actually adjust the capacity.

What I understand is there could potentially be some sort of staff reduction. The seven to 9%, is it after the non recurring items or is it before? I mean, we are not one

Brian Eberson, Group CFO, Columbus: of the companies, as you know, Wade, that sort of going after stuff. So everything is included in the 7% to 9% EBITDA margin, also restructuring and so on. And you’re right, we actually had a negative we actually had a cost of 2,000,000 extraordinary cost of 2,000,000. And I decided not to take that out because it was minor, so we eat that as well. But fair question, but it’s all inclusive, so to speak, if you understand.

Should

Wei, Analyst, SEB: we expect any meaningful restructuring costs or service payments in the second half?

Saran Koklusen, CEO, Columbus: Okay. So Brian, perhaps I can take that one because I will also just include the question on the from Michael Holbe here, who is asking us whether we regardless of all the macro factors if we will start to cut headcounts which is also sort of pertaining to the same question. So we will and we are doing capacity adjustments to our organization. I would like to make it clear that it is not anyway a hiring freeze. It goes back to what I said before about bespoke plans for each geographical business unit.

So some are hiring like data and AI in Denmark is hiring very heavily at the moment. But there are areas where we are adjusting some capacity. And also on the overhead costs, we are trying to bring that more in line with the slower growth than what we saw. So that’s clear. And we there’s an additional question here.

I assume that you remain that continue to have the goals of 2026, the EBITDA 15. So at the moment and we will report if we change anything that remains our goal. Obviously, as you can see from the adjusted guidance in ’25, we would have liked to get to 10 to 12 already this year. But we understand why we’re not getting there and it’s efficiency and it’s headcount. So it’s something we were fairly good at controlling.

So we think that the business model is really working. The contribution margin is there. The quality is there. The customer continuation is there. But yeah, we reported there is hesitance in the market.

Then the final question, can we expect that the share buyback will remain at the current level year out?

Brian Eberson, Group CFO, Columbus: Yeah, I mean, we are under some strict rules around it. So, we cannot sort of guarantee or expect that, but we continue as planned and as we can. But it’s basically out of our head that’s something we have outsourced to Nordea that is managing this part for us and not that involved with her.

Saran Koklusen, CEO, Columbus: Yeah. So, let me try also Brian. I mean, the way it works for us, we have set aside the amount communicated that is the trading mandate that has been given as it should be under the rules. And it is depending on how quickly we choose through that amount that’s been set aside. All right.

Thank you. I think that concludes or that’s all the time we have. Thank you for the great questions. Very exciting and challenging quarter for us. The strategy is definitely working.

So we’re seeing the returns and focusing on the right customers, the right industries, right solutions, But the market is challenging. We look forward to report back to you at the end of Q3. Thank you. That concludes the call.

Conference Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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