Earnings call transcript: Exsitec Q2 2025 shows software revenue boost

Exsitec Holding AB reported its Q2 2025 earnings, highlighting significant growth in net recurring software revenue and operational improvements across various segments. The stock saw a modest pre-market increase of 0.37%, reflecting investor optimism about the company’s strategic direction and financial health. According to InvestingPro data, the company appears undervalued based on its Fair Value analysis, with two analysts recently revising their earnings expectations upward for the upcoming period.

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Key Takeaways

• Net recurring software revenue grew by 28% year-over-year.
• The company reported an 8% growth in net sales, with a 10% increase in fixed currency.
• EBITA margins improved significantly in Norway, rising from 5% to 11%.
• Organic growth was negative at -2%, indicating challenges in expanding existing business.

Company Performance

Exsitec’s performance in Q2 2025 was marked by robust growth in net recurring software revenue, which now accounts for 24% of total revenues. The company experienced an 8% increase in net sales, although organic growth was negative. Segment-wise, Sweden saw an 11% growth, while Norway improved its EBITA margin despite a sales decline.

Financial Highlights

• Revenue: 8% growth overall, 10% in fixed currency.
• Adjusted EBITDA: SEK 44 million, up 1% from Q2 2024.
• Net recurring software revenue: 28% growth year-over-year.

Market Reaction

Exsitec’s stock price increased by 0.37% pre-market, reflecting positive investor sentiment. The stock’s performance is stable, trading closer to its 52-week midpoint between $10.29 and $19.64, suggesting confidence in the company’s growth prospects. InvestingPro analysis shows a "GOOD" overall financial health score of 2.73, with particularly strong momentum in recent months.

Outlook & Guidance

Exsitec aims for a 15% annual growth in net sales and EBITDA per share, building on its impressive five-year revenue CAGR of 25%. The company plans to keep net debt below 2x EBITDA and distribute 20-40% of profit after tax as dividends, currently yielding 1.28%. Strategic priorities include sales execution, operational excellence, and selective mergers and acquisitions.

For comprehensive analysis of Exsitec’s growth strategy and financial outlook, check out the detailed Pro Research Report available exclusively on InvestingPro.

Executive Commentary

CEO Niklas Yeck emphasized the company’s focus on delivering digital solutions and noted the passive sentiment among existing customers. He highlighted strong traction for Exsitec’s offerings and the company’s strategic partnerships with software providers.

Risks and Challenges

• Negative organic growth indicates potential challenges in expanding existing business.
• Passive customer sentiment could delay system updates and impact revenue.
• Fluctuating EBITA margins in key markets like Sweden and Norway could affect profitability.

Q&A

Analysts questioned the sustainability of recurring software revenue growth and the potential for organic growth through new customer acquisitions. The company expressed cautious optimism about market conditions, with strong order intake primarily from Sweden.

Full transcript - Exsitec Holding AB (EXS) Q2 2025:

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Welcome to Excitec’s presentation for the second quarter. Presenting today will be CEO, Niklas Yeck CFO, Karl Arne Sohn and me, Hampus Sandquist, Head of M and A and Investor Relations. If you have any questions, please use the raise hand function or the chat function in Zoom. And with that, I leave the word to Niklas.

Niklas Yeck, CEO, Excitec: Thank you, Hampers. Hello, everyone. This is Niklas Ek speaking. I am the CEO and has been there since the March. I will start off by making a short recap about our business as a reminder what we do.

After that, we will cover q two financials and a short market update and also a recap of our priorities going forward. We are excited making IT work together, and we exist to deliver digital solutions that improve our customers’ businesses, and we aim to be a one stop shop to the customer. We do this by selecting different softwares and develop in house integrations that can be reused, By implementing different software and provide long term support, we aim to be a single point of contact for our customers. The digital tools that we use can address areas like reducing financial administration through automation or use data for better decision making. Our customer base today is around 5,500 organizations, and our target market is medium- large sized companies in The Nordics.

No one customer typically is more than around 1% of our revenues, so very low risk in the individual accounts. We combine the software packages we work with to fit different industries, and we have customers in many different industry sectors, as you see in the slide. These are the primary software providers and partners that we work with at this time. We are resellers of softwares, and the selection has grown to just over 20 software components. We combine these softwares with integrations that we develop in house, and we have a revenue share partnership with these software providers where we market and sell their software to new accounts and make customers successful in using the software over time.

The business model is built on three revenue streams. The sales and marketing is focused on selling software together with integrations. This is sold on a subscription model where you pay as you use. This revenue stream has grown to 24% of our net revenue. Just under twothree of our revenue is from professional service, where we implement the software and make the customers successful in using the software over time.

We also do custom development and custom integrations when needed. The third revenue stream in our business model is that we offer customers a single point of contact support on a recurring fixed price model. In this engagement, we can also take care of infrastructure, Internet access, IT security and such things. Excitec is a Nordic company that started out from Linkoping Sweden. Today, we are around 600 employees with Sweden being the biggest segment.

We have been successful in the last ten years with growth, both organic and from M and A. Our EBITDA has followed our growth nicely with an exception in 2024. Excitec runs one of the largest trainee programs in The Nordics and has been doing that with scale since 2015. We are very proud of this, and almost 40% of the employees working at Excitec started as trainees. When it comes to the class of 2024, they were profitable now in q two as expected.

We are planning for a large program this August where we welcome around 60 new colleagues. Our training program is the main source for recruiting new people and an important addition for future growth. So let’s dive into specifics for q two. I will start off with the highlights and then leave the word to Karl Arneson, our CFO, for the financial details. Last year, we reported a strong Q2, and we still act in a market with a passive customer sentiment.

So we feel good about our stable margin of 19.4% and an adjusted EBITDA over SEK 44,000,000 this quarter, which was in line with the second quarter last year. Our total growth comes entirely from acquisitions. We are not that happy with the development in organic growth in Q2, something that we are continuously working on. One important factor for future growth is our new sales, and therefore, it’s satisfying to see our strong order intake in Q2, which was around 40% up compared to Q2 last year and the best quarter ever for Exitik. So with that, I leave the word to you, Karl.

Karl Arne Sohn, CFO, Excitec: Thank you, Niklas. Starting off with our net sales. We report an 8% growth in Q2 versus Q2 last year, where August mentioned, Niklas said, the organic growth was summarized to minus 2%. Following the weaker Norwegian and Danish kronas, we actually delivered slightly stronger numbers. In fixed currency, the total growth was plus 10% and the organic almost flat year on year.

During the quarter, we saw strong net sales performances in especially other Nordics and Sweden, mainly through our acquired businesses. And I will also come back to the development per segment shortly. Our growth comes from all our revenue streams, where professional services and software are the main ones, as mentioned, and the growth in recurring revenue stands out. But the overall feeling is still, and as mentioned in previous report as well, that our customers tend to push decisions for minor system updates and adjustments into the future, while bigger projects such as new investments and system migrations are developing more positively. Also looking at the trend the last six months, we see an 11% growth year on year, where the majority comes from acquisitions.

Moving over to our adjusted EBITDA. We report a 44,000,000 profit, which is 1% up versus Q2 twenty twenty four. However, and as mentioned, we still feel that we can deliver even stronger performances almost across all our segments. The efficiency, especially in Sweden and Norway, can be improved, and this is also something that we’re working continuously with. And year to date, the adjusted EBITDA is plus 7% versus last year.

For the entire year and also a few years back, the net recurring revenue from software has been a highlight for us. And for the last twelve months, we see a growth of 28% year on year in this revenue stream that made up 24% of our total revenues. This growth is driven by both M and A, new and cross sales and to a certain degree also from price increases. Overall, the organic growth in net revenue from software summarizes to approximately onethree of the growth for the last twelve months. This is, of course, a very important contributor to our earnings, but it’s also a good measurement to see that we have a strong offering and that customers continuing using the and deploying software that we deliver to the customers.

Regarding our different segments then. Looking into our different segments, we have Sweden that delivered 11% growth year on year in Q2, where the organic growth was slightly positive. The adjusted EBITA margin did not develop in the same manner but ended up at 24% versus 27% last year, although an uplift versus previous quarters, and the delta versus last year is better than in Q1. The lower margin year on year can mainly be explained by lower efficiency that we’re not completely satisfied with, as I mentioned. It can also be noted that despite a lower efficiency, the margin in Q2 is our second best Q2 margin in Sweden since the IPO.

Norway reported a minus 10% in net sales year on year in Q2, however, affected by a weaker Norwegian krona. In local currency, the decline was minus 5%. Despite this, it’s satisfying that we’re we managed to increase our adjusted EBITA and margin from 5% to 11% year on year, where an improvement in efficiency was the main driver behind the uplift. Even though that we’re happy with this improvement year on year in Q2, we still feel that we have more opportunities going forward in Norway. An improved margin in Norway is one of our key focuses going forward as a stable and strong margin over time is important for building a stronger business ready for future growth.

Finally, our third segment, Other Nordics, that covers our offerings in Denmark and Finland, reported a very strong growth of 48% in Q2, where the majority of the growth was acquired. Especially the professional services business in Denmark developed strongly during April and June, while May was slower in relation to other months 2025, which also affected the margin to for the total segment. We have been able to serve the customers acquired from ECIT well also during Q2, and we see further potential also in the coming quarters related to this. Worth mentioning is also that we, in Q2, had a slight negative one off in Finland that affected the margin for the segment. Regarding the margin, as we had 33% in Q1, we still believe that it should be significantly higher than last year, but it can also vary a bit from quarter to quarter when it comes to The Nordics.

And by that, I hand over to you again, Niklas.

Niklas Yeck, CEO, Excitec: Thank you, Karl. I will continue with a short update on the market conditions and our priorities for 2025. Our existing customers are still passive, just as we’ve been talking about in the last eighteen to twenty four months, and we still do not see that trend switching when it comes to invest more in existing systems and solutions. We do not see a trend towards churn on the other hand, so our customers are using the solutions and systems provided by us. But the small things like adding a new report or change something in the ERP is not on the same level as a couple of years ago.

M and A is an important part of Excitec, but so far in 2025, the timing has not been right for us. We are still building pipe and searching for companies that are a good match for Excitec. We had an increase over 50% in leads compared to q two last year. So we see good traction for our offering, and we feel optimistic about both, Visme and Microsoft when it comes to ERP solutions for new customers. So our business priorities in 2025.

Sales execution is important for us, especially when we struggle a bit with our professional services to existing customers. To be able to have organic growth, we need to be successful with new sales. We feel good about our sales force since we reported a strong order intake in Q2 and also the increase in leads from potential customers. The second one is about operational excellence. We have talked about the challenge with passive existing customers, and since around 80 to 85% of our professional service comes from existing customers, we need to keep working with our efficiency and our operational excellence.

And one thing that we do is to work actively to move people around where we see a bigger demand for our professional services to match our capacity. The last priority for 2025 is about M and A and integrating acquired companies. Brightcom was our biggest acquisition in 2024, and we are on the right track. As mentioned, we see good traction for the offering around Microsoft, and we closed several deals in Q2. We are also looking forward to welcome new trainees in August to Brightcom.

And about M and A, as mentioned, we continue to build pipe and keep looking for selective acquisitions when we have the opportunity. This is a reminder about our financial goals. We have a goal to increase our net sales by at least 15% per year over time, and our performance target is to increase our EBITDA per share by at least 15% per year over time as well. Our stability measures is that our net debt must not exceed 2x our EBITDA. And the last one is that our policy is to distribute 20% to 40% of the profit after tax.

And this concludes the presentation. Are there any question for us, Hampus?

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Let’s see. If you have any question, please use the raise hand function in Zoom. Yeah. We have a question from Thomas Nielsen. You can now unmute yourself, Thomas.

Thomas Nielsen, Analyst/Investor: Okay. Yes. Thanks for taking my question. Recurring revenues from software now accounts for 25% of your total revenue. How do you see this mix develop in the coming two to three years, especially with the the Business Next cloud migration in mind?

Niklas Yeck, CEO, Excitec: Yep. It is a 24% right now from in the revenue stream. We we see that we are very happy with the development when it comes to recurring revenue from license. And if it continues like now that we have a customer sentiment with passive customers, existing customers, It might be that the share of recurring revenue from software is increasing, but that’s not really the important thing for us that it continued to increase. Important for us is that the actual numbers from recurring revenue from software is increasing.

So I think it will depend on how our existing customers will behave in the future. So but of course, Business NEXT is an important software for us to continue to work with. And we do see that customers migrating from on premise systems to to cloud solutions that that increased the the the license for for the customers, and that increased our share of of that revenue as well. But, yeah, we we will see. Probably, it will go to maybe a few percent more in the in the coming year, but but some sometime, I think, with professional service, we’ll take off again as well.

Thomas Nielsen, Analyst/Investor: Okay. And a second question, if I may. You talk about a strong order intake, which was very positive in the report. Could you talk a bit about how this order intake, what it looks like in the in your three different geographic markets?

Niklas Yeck, CEO, Excitec: Yeah. So in this, if we if we go back to to actually look at the q four in 2024, we also reported a really strong order intake. That was a really good contribution from Norway. And if we look now in Q2, it was the majority of the strong order intake is in Sweden this time. So we’ve had really good numbers in Sweden.

And it’s a bit of a mix when it comes to our different offerings. The product mix is good. And so the biggest contribution is from Sweden and then from Norway and then from other Nordics in that order. And when it comes to Norway and Denmark, we see that BusinessNEXT is the is the one that we are selling the most. And in Sweden, it’s a it’s a mix with Visma solutions, Microsoft solutions, ecommerce solutions with Lytium, for for example.

But the short answer is Sweden is the biggest one in this quarter.

Thomas Nielsen, Analyst/Investor: Okay. Interesting. And then just one final question for me, if I may. When it comes to organic growth this year and next year, how much of the organic growth do you think will come from existing customers as compared to new customer wins this year and next year, if you were to guess?

Niklas Yeck, CEO, Excitec: That’s a good question. I I I think that there are more to to wish for from from our existing customers since we still see that the they are passive. We we we do work actively with our efficiency in the in the professional services. So so I think we we have some some to to to gain there. But then, of course, from new customer, if you can continue with strong order intake, we should be able to have organic growth from new customers.

As I mentioned, around 80% to 85% of our professional services comes from existing customers. So that’s still the biggest part. So we need to get better efficiency from that.

Thomas Nielsen, Analyst/Investor: Okay. Thank you. That was all from me.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Thank you, Thomas. We’ve gotten some some questions through the q and a as well. We have a question. It says 7% negative full time employees development in q two versus q one. Any comments what is driving the lower headcount?

Karl Arne Sohn, CFO, Excitec: Yes. I would say say Karl here speaking. We first of all, we we we, as as we highlighted in in our q one report, we made a reduction in our trainee program from from 2024 in in early twenty twenty four early Q1, sorry. So that affected slightly. But also, when it comes to Q2, normally, our staff turnover is slightly higher in Q2.

So looking at the trend also, Q2 from Q1 to Q2 last year, it was pretty much the same development. So this is not an unsignificant change from quarter to quarter. And also, it’s part of our business model. We have the trainee program that will provide us with with more people here now in starting in in August. So it’s not it’s not a a significant change in in in q two.

I wouldn’t say that.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Oh, I I I agree with Carl. It’s a it’s a natural process that we we accept your needs in in August, and then we do have some small training program also in January. But meanwhile, we do during the rest of the period, we do not hire extensively, so we do have employee churn all over. So this is this is mainly what’s driving the the negative FTE development, I would say. We have a question from Vincent E.

Hall. You now have permission to talk, Vincent.

Vincent E. Hall, Analyst/Investor: Hello. I hope you can hear me. But thanks for answering the question I posted in the Q and A. But I was also wondering about the strong order intake we’ve seen now for a couple of quarters in a row. And if you might be able to give us any comments on what to expect here going forward for Q3 and Q4 in terms of organic growth and when these orders can actually materialize growth on an organic basis, given the positive development in Q1 and now slightly negative development in in Q2.

Is it is it reasonable to to assume that you will post positive organic growth for for q three and q four this year?

Niklas Yeck, CEO, Excitec: Well, we first of all, it it it depends a bit on what what offering that we are selling and in how long time it takes for us to actually see the results from the strong order intake. We looked into that in Q4. As I mentioned, we had a strong quarter when it comes to order intake in Q4. And for some customers, we still don’t see a big result from that since it could take time to actually start a project. For smaller projects, we can actually start the project right away, and we can see some revenue from professional services.

But for the bigger projects, sometimes we need to do a a pre study, and it takes time from the customer as well before we actually start the project. And when it comes to support and revenue from software, it might take up to a year sometimes because that’s when the customer is live with the new system and we can actually start invoicing support and software providers can start invoice the license. So it depends a bit on when we can see it, But of course, strong order intake several quarters in a row, that’s a good thing for us. But again, as I said, 80% to 85% of our professional services comes from existing customers. So if they are still passive, we need to have strong sales.

And then you might ask, how strong sales? And that depends on the different offerings. But I think that we can see good numbers in the coming months if we continue with the strong sales. But it’s hard to say, and we don’t leave any forecast in how the order intake will affect organic growth.

Vincent E. Hall, Analyst/Investor: All right. So if we were to assume sort of markets still being passive, as you’ve seen during the last thirteen to twenty four months and also here in Q2, there is still a chance of organic growth driven by new sales from new clients in H2?

Niklas Yeck, CEO, Excitec: Yes. That might be possible. Yes.

Vincent E. Hall, Analyst/Investor: All right. Perfect. Thank you very much.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Thank you, Vincent. We also have another question. Could you elaborate a bit on what trends you see in your RIM sales? I assume that’s referring to, say, existing customers, and they’re calling in and asking for help.

Niklas Yeck, CEO, Excitec: Yeah. Well, we we see the same trend as we did in in the last eighteen to twenty four months. So it’s it’s really nothing new. So still we see that the the small things are pushed forward. We we do not have that as we talked about on the same levels as a couple of years ago.

So and that’s why we are struggling a bit with professional service on existing customers. So so it’s not on the same levels as a couple of years ago, but but the trend is not switching in in any in a way. So it’s quite the same as been in the last eighteen to twenty four months.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Good. We have another question. There is a similar trend with cautious current customer in several software and consulting companies. Could there be a structural change in current customers’ willingness to invest as they are getting more and more digitalized on average, or do you see it as a pure cyclical thing?

Niklas Yeck, CEO, Excitec: I think it’s more of a cyclical thing than than a change in a structural change. We still see when we talk to customers and what we hear is that they are more pushing the decisions forward and not not doing things rather than solving it in in other ways. So so so more of a cyclical thing. Yep.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Next question we have is what are the expected size of this year’s trainee program?

Niklas Yeck, CEO, Excitec: Around 60 new colleagues in total spread over Sweden, mostly in Sweden, and then we have people in Norway and Denmark. So that’s around half of what we did last year.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Great. We got a follow-up question on the RIN sales. How can you influence the RIN sales compared to how much you can influence the new sales?

Niklas Yeck, CEO, Excitec: Well, we I think for us, with a lot of customers, we have around 5,500 organizations. We need to actively work with them, and they need to know all the things that we can offer to them. So for example, if we do a good solutions for one customer using a software, we can probably use the same solution for other customers in that sector or industry or something like that, but those customers may may not know that there are those solutions out there. So so that’s something that we really need to work actively with. So so that’s something that we can influence and we we need to take care of our customers.

That that’s what we can can do. So so I think we can influence it. Yes. But but new sales, of course, we can can do that as well, and that we are working actively with increasing our sales force and working with marketing and so on.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: Next question is when you say that your trainee program from 2024 is now profitable, what do you mean with that?

Niklas Yeck, CEO, Excitec: We mean that the the revenue from from the trainee program is now, more than the costs for them. So so we are looking into that data, and and we have data from from all the years that we have been running this training program. So so that’s that’s what we mean.

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: So we do the when we when they start, we start calculating how much they cost. And in the beginning of the training program, they they use the crew costs, but over time, they also contribute with the revenue. And now we have they are now positive.

Niklas Yeck, CEO, Excitec: Yeah. That

Hampus Sandquist, Head of M and A and Investor Relations, Excitec: was the last question. Is there any other questions? Please raise use the raise hand function. It does not seem that we have any more questions. And then we say thank you for everybody who’s listening to this report, and we’ll see you next next quarter, hopefully.

Niklas Yeck, CEO, Excitec: Yeah. Thank you, everyone. Thank you.

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