Earnings call transcript: Dustin Group sees mixed Q4 2025 financials

Dustin Group reported its fourth-quarter 2025 earnings, showcasing a mixed financial performance. While the company achieved a 3.6% organic growth in sales amounting to SEK 5,056 million, its gross profit slightly declined compared to last year. Despite a 10% workforce reduction and cost-saving measures, the stock saw a minor decline of 2.39% in recent trading.

Key Takeaways

• Organic sales growth of 3.6% in Q4.
• Adjusted EBITA saw a significant increase to SEK 83 million.
• Workforce reduced by 225 full-time employees.
• Stock price decreased by 2.39% post-earnings.

Company Performance

Dustin Group's Q4 performance reflected a stabilizing market environment, albeit with a cautious customer approach. The company reported SEK 5,056 million in sales, marking a 3.6% organic growth. However, gross profit slightly decreased to SEK 642 million from SEK 644 million the previous year, indicating challenges in maintaining profit margins amidst competitive pressures, particularly in the Netherlands.

Financial Highlights

• Revenue: SEK 5,056 million (3.6% organic growth)
• Gross Profit: SEK 642 million (down from SEK 644 million last year)
• Gross Margin: 12.7% (down from 12.9% last year)
• Adjusted EBITA: SEK 83 million (up from SEK 28 million last year)
• EBITDA Margin: 1.6% (up from 0.2% last year)

Market Reaction

Dustin Group's stock experienced a 2.39% decline following the earnings call, reflecting investor concerns over the slight decline in gross profit and the company's cautious market outlook. This movement places the stock closer to its 52-week low of SEK 1.55.

Outlook & Guidance

Looking ahead, Dustin Group is targeting a 6.5% margin in the small and medium-sized business (SMB) segment and a 4.5% margin in the large corporate and public (LCP) segment. The company anticipates market recovery driven by Windows exchanges, AI PCs, and the renewal of aging IT equipment. Additionally, sustainability targets are set for 2030 and 2050.

Executive Commentary

CEO Johan Karlsson remarked, "We saw some positive development in LCP, where the market, primarily in the Nordics, is stabilizing." CFO Julia Lagerqvist noted, "The cost efficiency program is now completed, with annual savings of close to SEK 200 million."

Risks and Challenges

• Intense competition in the Netherlands affecting profitability.
• Market recovery patterns differing from past downturns.
• Potential challenges in maintaining cost efficiencies post-restructuring.
• Dependency on market recovery driven by external technological shifts.

Q&A

During the earnings call, analysts inquired about the slower hardware renewal in the SMB segment and the significant price competition in the Netherlands. CEO Johan Karlsson emphasized the need to improve margins by refining basic operations and winning tenders.

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

Conference Operator: Welcome to the Dustin Q4 presentation for 2024-2025. During the Q&A session, participants are able to ask questions by dialing 5 on their telephone keypad. Now, I will hand the conference over to the CEO Johan Karlsson and CFO Julia Lagerqvist. Please go ahead.

Johan Karlsson, CEO, Dustin Group: Thank you, Operator, and warm welcome to this Q4 presentation from Dustin Group. As you heard, Julia and myself, Johan Karlsson, are here to present that to you. If we start with some summary of the Q4 numbers on slide 2, as in the last quarter, sales were 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 SEK 5,056 million, representing an organic growth of 3.6%. The organic growth in the SMB segment was -6.3%. However, this number in SMB was affected by a retracted change in accounting treatment, and we balanced the correction. Organic growth was -2.2%.

LCP showed strength and reported an organic growth of 7.0%, 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 saw growth even there. Gross profit ended at SEK 642 million compared to last year's SEK 644 million. 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 markets continue to be slow in the Netherlands, the margins have continued to be under pressure also in Q4. Adjusted EBITA came in at SEK 83 million compared to SEK 28 million last year, with an EBITDA margin of 1.6% compared to last year's 0.2%. Cash flow from operating activities was -73% compared to last year's -365%.

Leverage at the end of the quarter was 4.3x, which is in line with Q3, and compared to the end of last year, it was 4.0x. If we look at operational effects for the quarter, we can conclude that the previously announced efficiency measures are fully implemented and that the cost saving from that is around SEK 200 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 aligned them with the science-based target initiative. If we look at the sales growth a little bit more in detail on slide 3, as I 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 LCP. This time, however, we see the larger customers moving ahead of the small. This is due to the fact that the stabilization and return of the market is fueled by the change of Windows 10 to 11 and not by changing economic or geopolitical settings. 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 rates than the smaller. All in all, this results in stronger markets for the larger customers than the smallers. With that said, let's move to slide 4 and look at the operational efficiency initiatives. Julia.

Julia Lagerqvist, CFO, Dustin Group: Thank you, Johan. Yes, moving to page 4, looking at the cost development in the quarter, we see, as in the previous quarter, that the reorganization and our cost efficiency measures have had a clear positive effect in the quarter compared to last year. Overall, SMB expenses decreased by 6.3% in the quarter. This was positive in both reports, and including this, the cost decreased 4.6%. The effect is slightly less than in previous quarters, as we had some positive one-offs last year, such that we have generally fewer consultants and ten stable customers, and the saving there becomes smaller. The cost efficiency program is now completed, with annual savings of close to SEK 200 million. 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.

If we go back two years, the total decrease is 13%, a solid reduction in workforce. In addition, there has been a reduction in the number of consultants and temporary staff. Plus, a reduced number of offices contributes to the savings. We move to the overview of the SMB segment on page 5, where sales landed at $1.2 billion or 7.9% below last year. However, as Johan said, the quarter was affected by a year-to-date retracted change in accounting treatment regarding net revenue recognition related to software, and this lowered net sales. Excluding this effect and the forest effect, the decline in sales was 6.2%. As Johan mentioned, in this quarter, we see strong 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 service sales decreased down to 10.4%, but this was mainly due to the mentioned retracted change in accounting treatment. The increase in the gross margin improved versus both last year and the previous quarter. The improved cost base from the cost saving program protected the segment results, which increased to $34 million, averaging $9 million last year, despite the lower volumes. All in all, the segment margin 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 focus on managed services of $13 million.

Going to page 6, we'll look then at LCP in the large corporate and public segments. The sales in LCP was SEK 3.9 billion in the quarter, plus 4.6% versus last year. The organic growth was 7%. There was a continued large negative growth impact from the segment sector. Sales growth improved versus previous quarter. Growth was mainly driven by the increased demand in Nordics stemming from the demand on 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, Belgium showed continued strong growth, as in previous quarters, due to some large new agreements. Finland also continued to show solid growth after a tough year. As I said before, we do see large volatility in sales between quarters in LCP.

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 from larger contracts with low margins. Conversely, margin in the Nordics was slightly improving, helped by country mix. On a global level, there was a negative customer mix with a larger share of public customers versus last year, which then had a lower average margin. This had a negative impact on the margin. We continue to see increase in payback, which had positive impact on both margin and EBITDA. 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. Overall, this led to a segment result of SEK 80 million, versus SEK 63 million last year.

Margin ended at 2.1% versus 1.4% last year. We note that last year was also impacted by a non-recovery cost of SEK 21 million. Moving to look at the cash flow and CapEx on slide 7, we see that the cash flow for the period was minus SEK 1.2 billion. This mainly is driven 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 net working capital was SEK 150 million plus, which was an improvement versus previous year, mainly driven by the improved operation results, but also better tax position. Cash flow from change in net working capital was minus SEK 188 million, which was still better than last year.

We normally have a negative seasonality expecting Q4, with purchases earlier in the quarter and no trolling at the end of August. We look more at net working capital on the next slide. In total, operating cash flow was minus SEK 73 million in the quarter. The cash flow from financing activities was, as I said, impacted by the repayment of loans. Looking at CapEx, we see that the total investment in the quarter was SEK 52 million, of which SEK 36 million affected cash flow. This is mainly linked to IT development investments. Investments in tangible assets was SEK 15 million this year, of which only SEK 2 million was affecting cash flow. The non-cash items are mainly lease contracts. Investments related to services was SEK 4 million compared to last year at SEK 23 million, and normally it is affecting cash flow. Coming then to page 8, we look at the net working capital development.

The net working capital landed at SEK 477 million, higher than last year at SEK 170 million, and also an increase over the previous quarter. Inventory levels increased versus previous year, now at SEK 1,086 million. This is mainly linked to Benelux and customer-specific inventory, so somewhat lower sales than expected. This is slightly below previous quarter, but clearly above our target levels. We have a clear target to reduce going forward. Accounts receivables increased versus last year, impacted by invoicing on larger contracts in Benelux at the end of the quarter. There is, as I said, a normal negative seasonality to accounts receivables and payables in Q4, as we get goods in early in the quarter for configuration and then have large rollouts at the end of the quarter. This was more visible this year with large sales volumes to specific customers.

As I said before, we always have some timing effect in the quarters, but our long-term target remains to be around -$100 million. With that, I hand back the word to Johan.

Johan Karlsson, CEO, Dustin Group: Thank you, Julia. Now we're moving to slide 9, 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 investment during the last year. 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 and some office locations, reducing cost by approximately SEK 200 million. We have also continued to transform our business toward more business customer focus, and by that announced that we've closed down the consumer list. At the same time, we're focused on our standard services on all our markets.

In order to gain scale, we are moving to a European offering in all markets, driving a stronger relationship to partners and vendors. Last but not least, we're continuing 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 and the sustainability area. On this slide, we have made a summary of the updated sustainability targets. The climate targets have been approved by the science-based target initiative. This means that we have climate targets for 2030 and 2050. We also have circularity targets as social impact targets for 2030. For 2030, our target for climate is to reduce the scope 1 and 2 emissions by 50%. For scope 3, the target is to reduce the CO2 intensity by 51.6%.

For circularity, our target is to increase revenue per kilo of new raw materials by 20%. 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. With that said, let's move to slide 8 and a summary of the quarter. 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 Netherlands in the quarter. Gross margin at 12.7% compared to last year, 12.9%, was affected by a 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 million of savings annually.

During the quarter, we concluded the efficiency measures, as mentioned before, saving approximately SEK 200 million on a yearly basis. We also continued with 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. With that, the formal presentation is concluded, and we can move to Q&A.

Conference Operator: If you wish to ask a question, please dial #5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #6 on your telephone keypad. The next question comes from Jesper Stygamo from Handelsbanken. Please go ahead.

Jesper Stygamo, Analyst, Handelsbanken: Yes, hello. Good morning, Johan and Julia. Thank you for taking my questions. I have a couple here. My first one is related to LCP as the main driver in this quarter. Do you have any feeling from the SMB side where they are in the approach to renew their hardware? Are they looking more to extend security upgrades for an additional year rather than upgrading to new hardware? What is your feeling there?

Johan Karlsson, CEO, Dustin 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 Stygamo, Analyst, Handelsbanken: All right. With the LCP picking up here, do you see that you will have enough volumes from this refresh cycle to increase their refurbishing, to actually give some upside on the margin as well already in this new fiscal year?

Johan Karlsson, CEO, Dustin Group: I think we will see that effect during the year because as the renewal starts to kick in, exactly like you say, also the take-back will kick in because most of these customers are on that type of contracts. It is our ambition to continue to increase the take-back in line with the new sales of these years.

Jesper Stygamo, Analyst, Handelsbanken: All right. 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 have bottomed out, or do you actually see a healthier market that customers are waking up and they are more active?

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

Jesper Stygamo, Analyst, Handelsbanken: All right. So police and military is the main driver here in Finland, I guess.

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

Jesper Stygamo, Analyst, Handelsbanken: All right. All right. Just the last question here on the FDE side, down 10% year on year. Do you see a need to recruit more people now when LCP looks to be turning a little bit better?

Johan Karlsson, CEO, Dustin Group: I don't think there is a direct need to recruit people because we also work with, let's say, efficiency on the other side. Our ambition is to more or less remain while 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 Stygamo, Analyst, Handelsbanken: All right. Thank you, Johan and Julia. I'll jump back in line here.

Johan Karlsson, CEO, Dustin Group: Thank you.

Conference Operator: Thank you. The next question comes from Daniel Thorsen from ABG Sundal Collier. Please go ahead.

Daniel Thorsen, Analyst, ABG Sundal Collier: Yes. Thank you very much. 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 Karlsson, CEO, Dustin Group: I don't think we saw kind of one offset immediately has a negative effect on Q1. Obviously, we are depending on customers continuing to exchange going forward to maintain the volumes that we have. Nothing on, let's say, a one-off term in that case.

Daniel Thorsen, Analyst, ABG Sundal Collier: Yeah. I see. I see. 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. 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 and a half years that make those levels harder to get closer longer term in your view?

Johan Karlsson, CEO, Dustin Group: In our view, it has not changed anything. Obviously, with a declining market, it's very hard to reach them. 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 Thorsen, Analyst, ABG Sundal Collier: Okay. I see. That's fine. Then finally, on cash flow, do you expect working capital to recover already in Q1 and be significantly better?

Julia Lagerqvist, CFO, Dustin Group: We do. I mean, like I said, we have a clear target to improve on our inventory levels. I mean, we also know historically we have a better position when it comes to accounts payable and receivables in Q1 versus Q4.

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

Johan Karlsson, CEO, Dustin Group: Thank you.

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

Michael Lesein, Analyst, DNB Carnegie: Yep. Thanks. Good morning. I have a question about the Netherlands. That country remained challenging. I was wondering if you could elaborate on the competitive landscape there, the price competition, and if you see any signs of improved tender activity or pricing pressure.

Johan Karlsson, CEO, Dustin Group: Yeah. Let's start with the competitive landscape. I would say that the Netherlands is a country where many of the large European and US resellers exist. Let's say they are in that market. That goes for CDW, that goes for Computacenter-based and a few more. There are also a few local players, but smaller. I would say in many areas in the Netherlands, it's a very fierce competition. That has an impact when the market is slow because then that competition really comes out in price competition. That's what we have seen lately.

Jesper Stygamo, Analyst, Handelsbanken: Okay. When it comes to this market situation and triggering this fierce competition, what 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 Karlsson, CEO, Dustin Group: I think if you look at the overall underlying market trends that will drive a more positive market, which we talk about, is the Windows exchange, it's the AI PCs, and it's the age of the PC or IT equipment at our customer side. I think they are the same in the Netherlands as they are in the Nordics. Our expectation is that over time, the market, also in the Benelux, will come to a situation similar to the ones in the Nordics. In normal cases, when that happens, the price competition goes down a bit because volumes are better. That's our expectation this time as well.

Jesper Stygamo, Analyst, Handelsbanken: Okay. So you're not seeing this Windows 11 exchange or demand in the Netherlands?

Johan Karlsson, CEO, Dustin Group: We see it, but to a lesser extent and more mixed compared to others.

Jesper Stygamo, Analyst, Handelsbanken: Okay. What can you do during this time when the market is a bit softer on your side to protect the margins or your market share?

Johan Karlsson, CEO, Dustin Group: I think it's a very good question because that is exactly the question to ask. What can you do in the current situation? What we can do, we can add services, namely take-back and lifecycle services to the hardware sales, which will improve the market. We can accept maybe a slightly lower margin on the hardware if we can also upsell with product near or lifecycle services around the hardware that can help us. We can also add our own private label product in the mix in a tender, for example, which helps the market. 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 won on a slightly lower margin level than before.

Jesper Stygamo, Analyst, Handelsbanken: Okay. Great. 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 Karlsson, CEO, Dustin Group: I think it's a combination of, you could say, a higher share of LCP sales than on an average quarter, and a part coming directly from the Netherlands competition. You could say that they are similar in size, I would say.

Jesper Stygamo, Analyst, Handelsbanken: Okay. In general, can you say something about the difference in gross margin between LCP and SMB, broadly speaking?

Johan Karlsson, CEO, Dustin 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 LCP is a couple of percentage points lower. It is that magnitude of difference.

Jesper Stygamo, Analyst, Handelsbanken: Okay. Yeah. That's helpful. Great. Just wondering here, what happened with the SMB side? I mean, 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 Karlsson, CEO, Dustin Group: It's a bit mixed bag there. I think Julia was hinting at that in the presentation. You could see that Norway and Sweden is doing relatively okay, while Denmark and the Netherlands is poor. There is a bit of deviation between the countries in the SMB that maps out to the minus two. I'm not really sure what drives the Danish numbers, to be perfectly honest. If it's a market, we don't really have the market data for that sphere.

Julia Lagerqvist, CFO, Dustin Group: I think it's a little bit similar. I also see similar price pressure there, as we've seen in the Netherlands and the U.S. and Latin America.

Jesper Stygamo, Analyst, Handelsbanken: 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 behind us now.

Julia Lagerqvist, CFO, Dustin Group: It is. The reclassification effect in this quarter was the full year-to-date effect. It was a large year. It will be very minor in the coming quarter.

Jesper Stygamo, Analyst, Handelsbanken: Okay. Got it. Thanks.

Johan Karlsson, CEO, Dustin Group: Thank you.

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

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

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