Earnings call transcript: Dustin Group AB Q4 2025 sees stock rise despite EPS miss

Dustin Group AB’s Q4 2025 earnings call revealed a mixed financial performance, with a significant earnings per share (EPS) miss but a revenue beat that appears to have buoyed investor sentiment. The company reported an EPS of $0.005, falling short of the forecasted $0.0157 by 68.15%. However, revenue surpassed expectations at $5.06 billion compared to the forecast of $4.94 billion, a 2.43% surprise. Despite the EPS shortfall, the stock rose by 11.43% in pre-market trading, reaching $2.126, before settling at $2.03, reflecting a 2.96% decline. According to InvestingPro data, the company’s stock has seen a dramatic -84.65% YTD decline, though recent months show promising momentum with strong returns over the past three months.

Key Takeaways

• Revenue exceeded expectations, indicating strong sales performance.
• EPS fell significantly short of forecasts, raising profitability concerns.
• Stock price increased pre-market but later declined, showing mixed investor sentiment.
• Adjusted EBITDA improved substantially, highlighting operational efficiency gains.
• Cost-saving measures are projected to yield significant annual savings.

Company Performance

Dustin Group’s overall performance in Q4 2025 was a mix of strengths and challenges. The company achieved organic growth of 3.6% and improved its adjusted EBITDA to $83 million, up from $28 million the previous year. However, gross profit declined slightly to $642 million from $644 million, and the gross margin decreased to 12.7% from 12.9%. InvestingPro analysis identifies weak gross profit margins as a key concern, with the company’s Financial Health Score currently at a weak 1.36. The company, now valued at $161.58M, is navigating a stabilizing market environment, with stronger performance in Nordic regions and challenges in the Benelux area.

Financial Highlights

• Revenue: $5.06 billion, up from $4.94 billion forecasted.
• Earnings per share: $0.005, down from the $0.0157 forecast.
• Gross Profit: $642 million, compared to $644 million last year.
• Adjusted EBITDA: $83 million, up from $28 million.
• Cash Flow from Operating Activities: -$73 million.

Earnings vs. Forecast

Dustin Group’s EPS of $0.005 missed the forecast of $0.0157 by a significant margin of 68.15%. In contrast, revenue of $5.06 billion beat the forecast of $4.94 billion by 2.43%, suggesting robust sales performance despite profitability challenges.

Market Reaction

The stock’s initial 11.43% rise in pre-market trading suggests investor optimism driven by the revenue beat and improved operational metrics. However, the subsequent 2.96% decline indicates a reassessment, potentially due to concerns over EPS and cash flow issues. The stock remains near its 52-week low, reflecting ongoing market caution.

Outlook & Guidance

Looking ahead, Dustin Group aims to achieve a 6.5% margin in the SMB segment and a 4.5% margin in the large corporate and public sectors. The company anticipates market recovery driven by the Windows 11 transition, AI PCs, and aging IT equipment. Improving working capital is a priority for Q1.

Executive Commentary

CEO Johan Carlson highlighted the company’s strategic focus on market stabilization and increasing take-back services aligned with new PC sales. He expressed confidence in achieving targeted margin levels, emphasizing the company’s strong presence in public and large corporate segments.

Risks and Challenges

• EPS miss raises questions about long-term profitability.
• Negative cash flow from operations could impact liquidity.
• Competitive pressures in the Netherlands may affect market share.
• Market challenges in the Benelux region require strategic adjustments.
• Potential macroeconomic pressures could influence future performance.

Q&A

During the earnings call, analysts inquired about the dynamics in the Netherlands market, potential for hardware refresh cycles, and the company’s approach to addressing margin pressures. Executives provided insights into strategic initiatives and market stabilization efforts.

Full transcript - Dustin Group AB (DUST) Q4 2025:

Conference Operator: Welcome to the Duston Q4 Presentation for twenty twenty four-twenty twenty five. Now I will hand the conference over to the CEO, Johan Carlson, and CFO, Julia Lagerquist. Please go ahead.

Johan Carlson, CEO, Duston Group: Thank you, operator, and warm welcome to this, q four presentation from Duston Group. And as you heard, Julia and myself, Johan Khosom, is here to present that to you. If we start with some summary of the q four numbers on slide two. As in the last quarter, sales was affected by a weak but stabilizing market with continued general cautiousness by the customers, mainly in the smaller customer groups. In the quarter, we saw some positive development in LCP where the market, primarily in The Nordics, is stabilizing.

Sales in the quarter was $5,560,000,000 representing an organic growth of 3.6%. The organic growth in the SMB segment was negative 6.3. However, this number in SMB was affected by a retracted change in accounting treatment. And without the correction, organic growth was negative 2.4. S and P showed strength and reported an organic growth of 7%, mainly driven by The Nordics where the market has been stronger.

In the Benelux region, market continues to be difficult, but due to some large new contracts in Belgium, we still grow even there. Gross profit ended at $642,000,000 compared to last year’s $644,000,000 Gross margin was at 12.7% compared to last year’s 12.9%. Gross margin in the quarter is seasonally low due to high share of public sales in Q4. As market continues to be slow in The Netherlands, the margins have continued to be under pressure also in Q4. Adjusted EBITDA came in at $83,000,000 compared to $28,000,000 last year with an EBITDA margin of 1.6% compared to last year’s 0.6%.

And cash flow from operating activities was negative 73,000,000 compared to last year’s negative three fifty five million dollars Leverage at the end of the quarter was 4.3 which is in line with Q3 and compared to end of last year it was four point zero. If we look at operational highlights for the quarter, we can conclude that the previously announced efficiency measures are fully implemented and that the cost saving from that is around CHF200 million. We are currently implementing the strategic changes that we announced in Q3 with long term profitability improvements. And we have updated our sustainability targets and align them with the science based target initiative. If we look at the sales growth a little bit more in detail on Slide three, as said before, the market is stabilizing and we can see some signs of recovery.

However, the pattern is not the same as in previous downturns in the market. As you can see in this slide, looking at the solid black and brown curve, the normal pattern is that SMB is coming back to growth earlier than SCP. This time, however, we see the larger customers moving ahead of the small. This is due to the fact that its stabilization and return of the market is fueled by the change of Windows 10 to 11 and not by change in economic or geopolitical setting. The trend of exchange of windows is so far mainly driven by the larger organizations.

Further to that, we see that the larger customers are starting to replace old equipment at faster rate than the smaller. All in all, this result in stronger market for the larger customers than the smallest. With that said, let’s move to Slide four and look at the operational efficiency initiatives. Yuliya?

Julia Lagerquist, CFO, Duston Group: Thank you, Johan. Yes, moving to Page four, looking at the cost development in the quarter. We see as in previous quarter that the reorganization and our cost efficiency measures have had a clear positive effect in the quarter compared to last year. Overall, SG and A expenses decreased by 6.3% in the quarter. This was positive and impacted by ForEx, and excluding this, the cost decreased 4.6%.

The effect is slightly less than previous quarters as we had some positive one off fixed last year, plus that we have, again, general less consultants and temp staff over summer, so the saving there becomes more. The cost efficiency program is now completed with annual savings of close to 200,000,000 SEK. The main driver is less personnel. Looking at the FTEs, we see that we have reduced FTEs by 225 or 10% versus the same quarter last year. And if you go back two years, the total increase is 13%, the solid reduction in workforce.

In addition, there has been a reduction in number of consultants and temporary staff, plus reduced number of offices contributes to the savings. Then we move to the OEO of the SMB segment on page five, where sales landed at SEK 1,200,000,000.0 or 7.9% below last year. However, as Johan said, the quarter was affected by a year to date projected change in accounting treatment regarding net revenue recognition related to software and this lowered net sales. Excluding this effect and the ForEx effect, the decline in sales was to 20%. As Johan mentioned, in this quarter, we see some signs of stabilization, but overall, the market remained tentative due to the ongoing economic uncertainty.

From a geographic point of view, Sweden and specifically Norway performed well, while Denmark and Netherlands were the main drivers of the decline. Looking at product mix, we saw that the share of software and services sales decreased down to 10.4%, but this was mainly due to the mentioned with rapid change in accounting treatment. The increase in the gross margin improved versus both last year and previous quarter. And the improved cost base from the cost saving program protected the segment result, which increased to 34,000,000 versus 9,000,000 last year despite the lower volumes. And all in all, the segment model ended at 2.9%, which was an improvement versus last year at 0.7%, obviously coming from a low base.

Note that last year was negatively affected by a one off posting related to COGS on managed services of 13,000,000 SEK. Going to page six, we looked at the LCP, the large corporate and public segment. And the sales in LCP was SEK 3,900,000,000.0 in the quarter, plus 4.6% versus last year, and organic growth 7%. So there was a continued large negative ForEx impact on the second segment. Sales rose improvements this previous quarter.

Growth was mainly driven by the increased demand and what extended from the demand of Windows 11 as Johan was just talking about. The economic uncertainty still impacted the market development, mainly evident in The Netherlands where we also saw heavy price competition. On the other hand, volume showed continued strong growth as in previous quarter due to some large new agreements, And Finland also continued to show solid growth after a tough year. As said before, we do see large volatility in sales between corpses and S and P. Gross margin decreased versus previous year.

The increased price pressure in The Netherlands on diminishing volume had a negative effect. We also saw continued effects of some larger contracts with lower margin. On the opposite, margin in The Nordics was slightly improving, helped by countries. On a global level, there was a negative customer mix with a larger share of public customers versus last year, from, which still have a lower average margin. This had a negative impact on the margins.

We continue to see increase in take back, which had positive impact on both the margin and EBITDA, and we also saw positive development in our private label business. The improved cost structure, mainly thanks to the restructuring program, had a positive impact on bottom line. And overall, this led to a segment result of SEK 80,000,000 versus SEK53 million last year, and margin ended at 2.1% versus 1.4% last year. We note that last year was also impacted by a non recurring cost of SEK21 million. Moving then to look at the cash flow and CapEx on Slide seven.

We see that the cash flow for the period was minus SEK1.2 billion. This mainly driven then by the repayment of loans after the rights issue, where the proceeds from the rights issue came in the end of Q3. Looking at details, we see that cash flow from operating activities before change in the 20 capital was 150,000,000 plus, which was an improvement versus previous year, mainly driven by the improved operation results, but also better tax position. Position. Cash flow from change in returning capital was minus SEK 188,000,000, which was still better than last year.

We normally have a negative seasonality effect in Q4 with purchases earlier in the quarter and not roll it at the August. We look more at the joint capital on the next slide. In total, operating cash flow was minus CHF 73,000,000 in the quarter. And the cash flow from financing activities was, as said, impacted by the repayment of loans. Looking at CapEx, we see that the total investment in the quarter was 52,000,000, of which 36 affected cash flow.

This is mainly linked to IT development investments. Investments in tangible assets was 15,000,000 this year, which only, two was affecting cash flow. The non cash items are mainly these contracts. And investments related to services was 4,000,000 compared to last year of 23,000,000, and normally, it’s affecting cash flow. Coming then to page eight, we look at the net working capital development.

Net working capital landed at 477,000,000 SEK, higher than last year at a 170,000,000 and also increases the previous quarter. Inventory levels increased versus previous years. Here, now at 1,086 million SEK. This mainly linked to Benelux and customer specific inventory, but somewhat lower sales than expected. This is slightly below previous quarter, but clearly above our target levels.

And we have a clear target to reduce going forward. Accounts receivables increased versus last year, impacted by invoicing of larger contracts in Benelux at the end of the quarter. There is a set of normal negative seasonality to accounts receivables and payables in q four as we get goods in early in the quarter for configuration and have large rollers at the end of the quarter. This was more visible this year with large specific customers. As said before, we always have some timing effects in the quarters, but our long term target remains to be around minus €100,000,000 And with that, I hand back the word to Johan.

Johan Carlson, CEO, Duston Group: Thank you, Julia. And now we’re moving to Slide nine and our plan to sharpen our strategic focus in order to increase profitability. There has been a high pace of change in order to strengthen the efficiency in Dostin during the last year. And there, you can say we have implemented the new organization structure around the value chain with offering sales and delivery and support functions, enabling higher pace of execution of the strategy. We have reduced the organization with approximately 200 positions in some office locations, reducing costs by approximately $200,000,000 We have also continued to transform our business toward more business customer focus and by that announced that we will close down the consumer business.

At the same time, we’re focused on our standard services on all our markets. In order to gain scale, we are moving to European offering in all markets, driving a stronger relationship to partners and others. And last but not least, we’re to use emerging technologies to drive process efficiency and automation. With that said, we can move to Slide 10, where we go through a little bit of the changes that we’ve done in the sustainability on the sustainability area. On this slide, we have made a summary of the updated sustainability targets.

So the climate targets have been approved by science based target initiative. This means that we have climate targets for 2030 and 02/1950. We have also circularity targets of social impact targets for 02/1930. For 02/1930, our targets for climate is to reduce the Scope one and two emissions by 50%. And for Scope three, the target is to reduce the CO2 intensity by 51.6%.

For circularity, our target is to increase revenue per kilo of new raw material by 20%. And for social impact, the target continues to be the implementation of 100 initiatives across the value chain. The climate target for 2050 is to reach net zero emissions. And with that said, let’s move to Slide eight and a summary of the quarter. So in summary, Q4 quarter was a quarter where we saw continued market stabilization and where we achieved 3.6% organic growth.

Nordics showed a stronger performance than the Manilux in the quarter. Gross margin at 12.7% compared to last year’s 12.9% was affected by higher share of public sales and by the price competition in The Netherlands. Adjusted EBITDA margin at 1.6% was up from last year’s 0.6 driven by the finalization of the efficiency program delivering approximately $200,000,000 of savings annually. During the quarter, we concluded the efficiency measures as mentioned before, saving approximately $200,000,000 on a yearly basis. We also continued the strategic focus announced in Q3 with the closing of the consumer business and the focus on standardized services.

Further to that, as we’ve just heard, we have updated our sustainability targets to align with the market development and customer requirements. And with that, the formal presentation is concluded and we can move to Q and A.

Conference Operator: The next question comes from Jesper Stigemo from Handelsbanken. Please go ahead.

Jesper Stigemo, Analyst, Handelsbanken: Yes. Hello. Good morning, Johan and Julia. Thank you for taking my questions. So I have a couple here.

My first one is related to LCP as the main driver in this quarter. But do you have any feeling from the SMB side where they are in the approach to renew their hardware? Are they looking more to like extend security upgrades for an additional year rather than upgrading to new hardware? Or what is your feeling there?

Johan Carlson, CEO, Duston Group: My feeling is that we don’t look at additional time from adding purchasing more time. It’s rather they are a bit slower out in the process, let’s say. So we don’t see a lot of purchasing or prolongations.

Jesper Stigemo, Analyst, Handelsbanken: All right. And with the LCP picking up here, you see that you will have enough volumes from this refresh cycle to increase the refurbishing to actually give some upside on the margin as well already in this new fiscal year?

Johan Carlson, CEO, Duston Group: I think we will see that effect during the year because as as the renewal starts to kick in, exactly like you say, also, let’s say, the take back will will kick in because most of these customers are on on that type of contracts. So it’s our ambition to continue to increase the take back in line with, let’s say, new sales of PCs.

Jesper Stigemo, Analyst, Handelsbanken: All right. And in Finland here, we saw some good sales momentum up year on year. What trends do you see in the market? This has been quite slow in the last year. Is this mainly related to that the negative trends has bottomed out?

Or do you actually see a healthier market that customers are waking up and they’re more active or

Johan Carlson, CEO, Duston Group: Yes. I would say that we are seeing customers waking up or or getting more money because in in Finland, we are relatively high in the public sector of sales. So it means that the public budgets are of great importance. And here, you could see that primarily, let’s say, police and military have very good budgets at the moment, so they can they they can actually boost purchasing of of IT equipment.

Jesper Stigemo, Analyst, Handelsbanken: Right. So police military is the main driver here in Finland, I guess.

Johan Carlson, CEO, Duston Group: They are, for sure, important part of that. But I would say, in Finland, in general, the it seems like the public budgets are a bit more generous this year compared to last year, which affects us.

Jesper Stigemo, Analyst, Handelsbanken: All right. All right. And just the last question here on the FTE side, down 10% year on year. But do you see a need to recruit more people now when OCP looks to be turning a little bit better?

Johan Carlson, CEO, Duston Group: I don’t think that there is a direct need to to recruit people because it will we also work with, let’s say, efficiency on the other side. So our ambition is is to, you know, more or less remain while the the volume is going up. Of course, there will be areas where we need to strengthen a bit, but it’s not a direct relationship between, let’s say, volume increase and more people.

Jesper Stigemo, Analyst, Handelsbanken: Alright. Thank you, Juan and Yulam. I’ll jump back in line here.

Johan Carlson, CEO, Duston Group: Thank you. Thank you.

Conference Operator: The next question comes from Daniel Thorson from ABG Sundal Collier.

Daniel Thorson, Analyst, ABG Sundal Collier: A question on LCP here in Q4. Did you see any larger deliveries in the quarter, especially related to the end of life support on Windows 10 that could cause a setback in Q1? Or should we expect these levels to continue recovering in LCP ahead?

Johan Carlson, CEO, Duston Group: I don’t think we saw kind of one offs that immediately has a negative effect on Q1, but obviously we are depending on customer continuing to exchange going forward to maintain the volumes that we have. But nothing on, let’s say, one off churn in that case.

Daniel Thorson, Analyst, ABG Sundal Collier: Yes. I see. I see. And then secondly, a more long term question on your financial targets, you are targeting 6.5% margin in SMB, 4.5 in LCP, which is already next year, which obviously nobody believes in right now. But my question is rather if those levels are achievable longer term in your view or has anything changed structurally in the market over the last two, two point five years that make those levels harder to get closer longer term in your view?

Johan Carlson, CEO, Duston Group: In our view, it has not changed anything. It’s obviously with the declining market, it’s very hard to reach them. But over time, with a more positive market, I don’t see any reason why we should not be able to get to these levels going forward.

Daniel Thorson, Analyst, ABG Sundal Collier: Okay. I see. That’s fine. And then finally on cash flow, do you expect working capital to recover already in Q1 and be significantly better?

Julia Lagerquist, CFO, Duston Group: We we do. And like I said, we have a clear target to improve on our on our inventory levels. And we also normally, if you look historically, we normally have a better position when it comes to accounts payables and receivables in q one versus q four.

Daniel Thorson, Analyst, ABG Sundal Collier: Yeah. Okay. Fair enough. Thank you very much.

Johan Carlson, CEO, Duston Group: Thank you.

Conference Operator: The next question comes from Michael Lassine from DNB Carnegie. Please go ahead.

Michael Lassine, Analyst, DNB Carnegie: Yes. Thanks. Good morning. I have a question about The Netherlands. That country remained challenging.

And I was wondering if you could elaborate on the competitive landscape there, the price competition. And if you see any signs of improved counter activity or pricing pressure?

Johan Carlson, CEO, Duston Group: Yes. Let’s start with the competitive landscape. I would say that Netherlands is a country where many of the large European and U. S. Resellers exist.

Let’s say they are in that market. That is that goes for CDW, that goes from Computacenter, Besht, and a few more. And there is also a few local players, but smaller. So it it’s I would say, like, in many areas in The Netherlands, it’s it’s a very fierce competition, and and that has an impact when the market is is slow because then that competition really comes out in price competition. So that’s what we have seen lately.

Michael Lassine, Analyst, DNB Carnegie: Okay. And when it comes to this market situation and triggering this fierce competition, what I mean, the leading indicators are you looking at? And what trends are you seeing there? And how should we think about the coming couple of quarters?

Johan Carlson, CEO, Duston Group: I think the if you look at the overall underlying market trends that will drive a more positive market, which we talk about, it is the Windows Exchange. It’s the AI PCs, and it’s the age of the, let’s say, PC or or IT equipment at our customer site. I think they are the same in The Netherlands as they are in The Nordics. So our expectations is that over time, the market, also in the bandwagon, will come to a situation similar to the ones in The Nordics. And in normal cases, when that happens, the price competition goes down a bit because volumes are better.

And that’s our expectation this time as well.

Michael Lassine, Analyst, DNB Carnegie: Okay. So so you’re not seeing this Windows 11 exchange or demand in The Netherlands?

Johan Carlson, CEO, Duston Group: See it, but to to a lesser extent and and more mixed compared to others.

Michael Lassine, Analyst, DNB Carnegie: Okay. And so what can you do during this time when when the market is a bit softer?

Johan Carlson, CEO, Duston Group: I’m sorry.

Michael Lassine, Analyst, DNB Carnegie: To get the margins or your market share?

Johan Carlson, CEO, Duston Group: I think it’s a good very good question because that is exactly, you know, the question to ask. What can you do in the current situation? And what we can do, we can add we can add services, namely take back and and life cycle services to the hardware sales, which will improve the market. So we can accept maybe a slightly lower margin on the hardware if we can also upsell with product near or life cycle services around the hardware. That that can help us.

We can also add our own private label products in the mix in a in a in a tender, for example, which improves the market. So we need to go back and work on all the basic stuff to improve margins in parallel with trying to win the tenders, which will be borne on a slightly lower margin level than before.

Michael Lassine, Analyst, DNB Carnegie: Okay. Great. And when it comes to this gross margin decline that we saw now in Q4, how much is attributed to Netherlands specifically and how much is mix and other things?

Johan Carlson, CEO, Duston Group: I think it’s a combination of you could say that a higher share of LCP sales than on an average quarter and apart coming from directly from The Netherlands competition, you could say that they are similar in size, I would say.

Michael Lassine, Analyst, DNB Carnegie: Okay. And then in general, can you say something about the difference in gross margin between LCP and F and B broadly speaking?

Johan Carlson, CEO, Duston Group: The difference is you could say that if the average is 15, then as an example, I would say SMB is a couple of percentage points better and then CP is a couple of percentage points lower. So it’s that magnitude, no difference.

Michael Lassine, Analyst, DNB Carnegie: Okay. Yes, that’s helpful. Great. And I just wondering here what’s happened with the SMB side. It seems, I mean, like the Nordic Region is stabilizing a bit.

Not sure what you’re seeing there and why you have that weakness of minus two underlying growth excluding reclassification.

Johan Carlson, CEO, Duston Group: Well, there it’s a bit mixed bag there. I think Jule was into that one in the presentation. You could see that Norway and Sweden is doing relatively okay, while Denmark and The Netherlands is poor. So the there is a bit of deviation between the countries in the SMB that nets out to the minus two. So it’s I’m not really sure what drives the Danish numbers, to be perfectly honest.

If it’s a market, how the market we don’t really have the market data for that that’s clear. But

Julia Lagerquist, CFO, Duston Group: I think it’s related to that. I also see similar price pressure there as we’ve seen in The Netherlands. I remember at Netherlands and that’s

Michael Lassine, Analyst, DNB Carnegie: Okay. Got it. Just also curious if we should think about this reclassification effect continuing in Q1 and Q2 as well or if this is so behind us now?

Julia Lagerquist, CFO, Duston Group: It’s the reclassification effect in this quarter was the full year to date effects. It was largely would be very minor in the coming quarters.

Michael Lassine, Analyst, DNB Carnegie: Okay. Got it. Thanks.

Johan Carlson, CEO, Duston Group: Thank you.

Conference Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Johan Carlson, CEO, Duston Group: Okay. Thank you very much for listening in and asking questions to the Q4 report presentation from Duston. So thank you very much, and have a nice day.

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