Earnings call transcript: Omda AS Q2 2025 shows strong revenue growth

Omda AS (market cap: $1.18 billion) reported its financial results for the second quarter of 2025, highlighting a 16% increase in revenue to SEK 243 million. The company’s stock rose by 3.34% following the announcement, reflecting positive investor sentiment. According to InvestingPro analysis, the stock appears overvalued at current levels, despite trading 17% below its 52-week high of $28.40. The earnings call detailed significant achievements, including a record in recurring revenue and notable progress in AI integration.

Key Takeaways

• Revenue grew by 16% to SEK 243 million.
• Recurring revenue hit a new record at SEK 96 million.
• Stock price increased by 3.34% post-announcement.
• EBITDA margin stood at 19% for Q2.
• Strategic focus on AI and software development.

Company Performance

Omda AS demonstrated robust performance in Q2 2025, with revenue increasing by 16% year-over-year. While the company is not currently profitable, InvestingPro data shows analysts expect profitability to improve this year. The company’s strategic focus on healthcare and emergency response software continued to yield positive results, supported by solid organic growth of 7%. With an impressive gross profit margin of 63.3% and a strong Financial Health Score of 2.74 (rated as "GOOD"), Omda’s unique positioning in the Nordic markets and its strong customer retention contributed to its success.

Financial Highlights

• Revenue: SEK 243 million, a 16% increase from the previous year.
• Recurring Revenue: SEK 96 million, setting a new company record.
• EBITDA Margin: 19% for Q2, with a year-to-date margin of 20%.
• Organic Growth: 7%, within the company’s guidance range of 5-10%.

Outlook & Guidance

Omda AS provided an optimistic outlook for the remainder of 2025 and into 2026. Analyst consensus is bullish, with price targets ranging from $24 to $30, suggesting potential upside. The company expects to achieve an EBITDA margin between 23-27% for 2025 and projects revenue to exceed SEK 500 million in 2026. Omda also anticipates 10-20% inorganic growth through strategic acquisitions, reinforcing its market position. Get access to more detailed analysis and 10 exclusive InvestingPro Tips for Omda through the comprehensive Pro Research Report, available on InvestingPro.

Executive Commentary

CEO Gisvario Flappi emphasized the company’s commitment to innovation and efficiency, stating, "We deliver niche software powering specialized healthcare and emergency response value chains." He highlighted the importance of maximizing efficiency in patient services, adding, "Our role is to secure that every second, every minute and every hour is used the best possible way for the patients that rely on these services."

Risks and Challenges

• Cost Management: Omda aims to reduce costs, targeting a COGS of 5% and lowering salary expenses from 60% to 50%.
• Market Competition: The company faces competition in the specialized healthcare software market.
• Economic Uncertainty: Macro events could impact financial performance, although Omda’s business model has shown resilience.

Q&A

During the Q&A session, analysts inquired about Omda’s AI integration strategies and potential M&A activities. The management elaborated on their plans to enhance development efficiency through AI and discussed the criteria for future acquisitions to support growth objectives.

The earnings call underscored Omda AS’s strong financial performance and strategic initiatives, positioning the company for continued success in the specialized healthcare and emergency response software sectors.

Full transcript - Omda AS (OMDA) Q2 2025:

Einer, Moderator/Host, OMDA: Good morning, ladies and gentlemen, and welcome to the presentation of Omdas achievements for the second quarter of this year. The report and a copy of this presentation is available on news web and on omda.com. The webcast will consist of a presentation of approximately thirty minutes and then followed by a live Q and A session. You can type in your questions at any time during the presentation and we will attend to the questions immediately after we have finished the presentation. Recording of this webcast will be made available on our website and soon thereafter also a transcription.

We have an exciting agenda today. We will look at the highlights for the quarter. We will take a revisit the outlook for the rest of this year and for next year. We will take a deep dive into the financials. And before we head into the Q and A, we will sum it up.

Right. As always, I’m here together with my partner and long term friend and colleague, Gisvario Flappi. The stage is yours.

Gisvario Flappi, CEO/Co-Founder, OMDA: Thank you, and good morning, everyone. We are here to present the best mid year report since Onda was listed on Euronext growth in 2020. Numbers are exactly as planned and strong, which shouldn’t surprise anyone. And before we dive into margins and growth, let’s pause and reflect on what’s really driving them. I think if you look at this situation, I hope you’ll never get there, but as we speak, calls are coming in in many countries and Onda’s role in this situation is supporting quietly millions of people every single day.

Whether it is an acute call center or a maternity ward, a cancer clinic or many other types of highly specialized type of services. Our role is to secure that every second, every minute and every hour is used the best possible way for the patients that rely on these services. And now, more than seven fifty contracts, active contracts in 26 countries. Our business is built up on several smaller revenue streams together forming a resilient whole. And in our report, we have mentioned a few of the important smaller steps.

For instance, the fertility area, where we now reached a milestone where all the public hospital delivering fertility services in Sweden are using on the software. Another example was the cardio team, which delivered a much larger solution, but then again highly specialized with 20,000 users. And the summary of all of these smaller things happening is what creates the diversification. And the diversification is the reason why the first quarter and the second quarter is following the guiding we gave you in December 2024. So let’s now talk about the key takeaways in the report before our resident numbers enthusiasts happily drowns you in details.

First up, revenue growth. Reported revenue growth 16% this quarter. And I think you all will see that the revenue growth itself is important. However, what’s inside here and what is the quality of the growth? As you know, our counterparties are publicly funded or public organizations behind of these recurring revenue streams that also increased 16%.

And I think you all would understand with the low churn we have lower than 2% that the value creation underneath based on this recurring revenue is very, very important. And also, a year ago, we announced measures to increase professional services and to also increase the billable utilization. With 35% growth, we can tick that box as another success. And as always, the lumpiness is the one time income normally decided and determined on the customer side milestones where we have the license sales, not so many this quarter compared to the same quarter last year. However, 16% growth and our two recurring and semi recurring is high growth and a success.

So organic growth then in constant currency 7%, nicely within our guided range of 5% to 10%. So the income side here to sum it up, this is the value creation, 79% recurring revenues and as you will see the 19% professional services, the combination of those two are very strong and is the foundation for the future when you look at what’s going on when we guide further on, what’s going on in 2025, 2026 and the years to come. So let’s go back to the margin, what’s happened with the margin. In the second quarter, 19% margin and in year to date, 20% margin. So it stands there.

And for us, this is exactly like plan, exactly like communicated. So this should also strengthen our view to the guiding going forward. So talking about guiding and our next steps, what’s going to happen in 2025 and what’s going to happen in 2026 based on the strong numbers in the first half year. First, let’s look at the revenue development. If you take this simple jump with 16% from SEK210 million to SEK243 million, a very simple calculation could be 2x the sales in the first half year, Then you would see on the right hand side our guiding.

First, there you have 2024, the actuals, you have our guiding for 2025 and also we reiterate what we think about 2026. So we stick to that top line guiding we presented to you in December 2024. So if you look at that, you’ll see that the growth in the first quarter combined with what we see in the growth in recurring revenue going forward and professional services, we will stick to that guiding. So what about margins? One thing is it stands at 20, jumping from twelve, eight percentage point better than the same quarter last year.

So it stands there, yes. But what is really important here is the way it travels going forward. So we have to go from 20 and plus three or seven to reach to our interval that we have guided to all of you recently. And how do we do that? Because the main thing here is actually the actions taken that will bring us there.

So I will try to explain how are we going to perform between 2327% EBITA in 2025 as a whole. And then three things matters. One thing is the income that we just presented and the way that run rate is. That is one thing that gives us comfort that the top line is good enough to secure this. Secondly, we have told you before in December and also previously, the divestments of our Philippine development center are reducing the number of FTEs.

And that happens in the second half year of this year. And then number three, we have made three acquisitions. But if you look at the business before the acquisitions, you’ll see that the number of FTEs are also reduced according to plan. So if you combine the actual actions now made and put that together, you will reach exactly in between the guiding here on the EBITDA margin. So we stick to that and comfortably want to say that we will say what we do and do what we say and expect now the 23% to 27 margin for 2025.

I would also like to actually reiterate what’s going to happen in 2026, because what you will see is that in 2026, we have the margin that comes from the 2025. And of course, since we stand at 20% in the first half year, we have to perform roughly around plusminus 30% EBITDA in the second half to have the same and the right run rate into 2026. So we stick to that guiding as well, a top line of more than 500000028% to 32 EBITDA in 2026. So that should give you quite a good understanding of what’s going on in 2025 and 2026 when it comes to our organic business. But not only that.

What’s going on with Onda in the future and from 2016 onwards is not only focusing on the organic business. However, I think it’s very important to repeat three things about OMDA. And number one, probably the most important one, what makes OMDA unique? We deliver niche software powering specialized healthcare and emergency response value chains. This is very, very important.

We are not a serial acquirer. We are not a generic vendor selling software within healthcare. We only do these things, supporting these complex value chains. That is what we do. And that means based on that, number one, we have two other things that are important to understand to see what type of value creation will we give our customers and shareholders the years to come.

First of all, we have an organic business and we have proven the organic growth between 510% is what we also expect years to come in all of these types of value chain supportive software. And then we are now entering a half year, we are in it actually, where we will perform with EBITDA margin around 30%, which we also guide you for 2026. And that should be the basic profitability platform for our current organic business going forward as well. And then also CapEx, 10% of revenue CapEx, what is it? It’s actually business cases developing smart components that could be added to current customers’ value chains and then increase recurring revenue further.

So this is our organic business inside this emergency response and specialized healthcare area. On top of that, not saying that we are a generic serial acquirer, but we are using serial acquirer mechanisms to add growth on top of our organic business. So we think probably around 10% to 20% should be expected from us 26 in the years ahead when it comes to added software recurring revenues coming into our current businesses that has a value chain position or create new value chain within the same areas. And what we do is actually to acquire customers code and competence, meaning recurring revenue streams based on software that we can own and also competence in these specialized areas to support it. As long as we do that, we can continue without disturbing the one to the left, the organic business too much.

So all in all, that will be our current strategy. And we think that will be the best balance between growth and profitability and predictability, scalability going forward. So the acquisitions we will do, they have to be based on a sound business case and it has to comply with the specialized healthcare and emergency response value chains. So all in all, I’m quite happy to summarize that we have had a strong mid year report here and also looking very good for this year and ’26. And having said that, Einer, the audience has now actually seen a strong first half.

And maybe you can either confirm with the details that that’s correct or maybe leave us all completely confused.

Einer, Moderator/Host, OMDA: So I think I’ll go for the confirmation bit. All right. Let’s have a deep dive and look into the financials. Let’s start with the revenue diversification. As always, Ombla is a very diversified business and the biggest business area is the emergency.

Strong growth there and also that’s where we have made the two of the three latest acquisitions also within that business area, six acquisitions altogether in Hondas history. And then we made another acquisition related to Connected Imaging that also enhances that business areas part slice of the pie. But still very diversified and we are still very much based on Nordics. Again, the last three acquisitions were all Nordic, all Swedish, all from Gothenburg actually. And that of course further enhances our presence in Sweden both on the customer side and also where the most of the employees are.

So you see that Norway is number two and the rest of the world seems to have shrunk a little bit, but it hasn’t. It’s just that Norway and Sweden has grown more. But again, very diversified more than we are present in more than 26 countries, more than seven fifty unique contracts and we are located in 10 countries. Okay, one of my favorite slides, ladies and gentlemen, the recurring revenue. We see going back from the first quarter in twenty seventeen, each and every quarter recurring revenue increases reaching $96,000,000 in the second quarter, a new record.

And the run rate $384,000,000 we are approaching $400,000,000 in run rate. And again, the counterparties here, public sector or public sector like companies and less than 2% churn per annum. So this is really the beauty. Very favorable revenue mix. If you look at the mix there, you see that software related revenues, they comprise more than 80% of total sales.

But that said, the recurring revenue being the highest ever and we’re close to covering all fixed costs, mind you, with recurring revenue alone. But also like to point out the strong sales of professional services. A little more than a year ago, we communicated that we had identified that there was a huge potential to increase the professional services, not by employing more people or establishing a consultant department, but just making sure that invoiceable hours are indeed invoiced and when they are invoiced at the right hourly price. And we said there was a substantial potential there. Okay, from NOK17 million in the last quarter, same quarter last year to NOK23 million in the second quarter this year.

And we have not said that there is not a further potential to be realized. The cost the FDA cost base, we look we divide the cost in three COGS, salary, personnel and everything else. If you look at the COGS, our target is to bring the COGS down to 5%. We’re seeing the number five, starting with the five now, 5.8%. So we are approaching a gross margin of 95%.

And since we IPO ed, it was around 11%. We have taken it down a little each and every quarter and we think that there is more to come. So the 5% target, which you know when we first launched it, it would mean that we would more than half the COGS, were almost there. Other OpEx, our target was 15% or below and we are below 15% for the second quarter in a row. So we are there.

And also in actual numbers, you see from last from the second quarter last year, 2017 to 2018, almost the same number, even though we have done three acquisitions since that time and the revenue has grown more than 16%. And salary and personnel, we are around 60%, our target is 50%, so still a little above. But also keep in mind that it’s not evenly distributed over the year. Some quarters are lower, so on average it is below the 60 Number of FTEs, remember to compare apples and apples here because again the two ninety three compared to the two eighty seven in the 2024. Keep in mind, we have done three acquisitions, customer code and competence and there is some competence associated with those.

And also, is still this is the last quarter where we still have the agreement with the former colleagues in Cebu. And we have done some selective hiring in The Nordics to ensure a smooth transition there. But overall, the cost initiatives, they work. And they lead to good visibility of heading into the third quarter and the second half of this year. EBITDA, not only is it in line with our guidance, but it’s a strong increase from last year, more than doubles from 10.4% to 23% and almost doubles in percentage points, so nine percentage points increase, almost double there as well.

Q1 surely wasn’t a one hit wonder. Again, very strong sales of recurring revenue, very strong sales of professional services. And again, we see the impact from the strict cost discipline, again providing very good visibility for the second half of this year. CapEx, most of the CapEx is the investment in our own software. And again, that is where the a lot of the organic growth comes from.

So when we sell new modules with to current customers related to current installations, the new modules, new software must come from somewhere and it comes from the in house development that is capitalized. So that is most of it, but we see that in and there’s also some PP and E, not very much. Altogether, combined, we see that there’s a slight decrease from the same quarter last year, both in total and in percent. The CapEx related to software development approximately the same. PPE is down to more from 3.6 to 0.6, which is a more sustainable level and more level you should expect.

So all in all, all around 10% the CapEx. And what is also good, the net working capital. Again, we had the best quarter ever in the fourth quarter last year and then a record high or low, depending on how you view it, minus 23% in the second quarter. And we are repeating that in sorry, the first quarter, repeating that in the second quarter. This is the best net working capital second quarter we have ever had.

Again, have communicated minus 10% or better, so we had minus 23% in the second quarter. People, we are approaching $500,000,000 in sales, minus 23% net working capital, do the math. Associated with net working capital is, of course, cash and we’ll continue to focus on cash going forward and heading into the third quarter, we’re actually there and heading into the fourth quarter at the end of this year, we will continue to focus on cash and be very strict on that. Different business areas, they were all performing well this quarter, just as they were in the first quarter this year. There are some individual variations.

There will always be, we’ve said it before, don’t look too closely on the quarterly variations. But you see that on some of the business areas and not only do they pass the rule of 40 test, they are even beyond that. It shows you the potential that is inherent in the business areas. And some when you look to them a couple of quarters ago, we had questions, is this too small, is it sustainable, what will happen, and we see it now. So there is a strong potential in the business areas and that is what they have in common.

In Emergency and also Connected Imaging use, will remember that we that is where we have made some new acquisitions by integrate and build, there is always something to do. It impacts the margins slightly short term. And that is what we do to unchain and release and unleash the long term potential that we and the synergies that are identified during the due diligence process. So that is what we do. Just a reminder also how do we calculate organic growth, etcetera.

Here you see that on the income side, all business is included as it is on EBITDA. But on organic growth, we exclude the last three acquisitions. And the reason is we don’t have really reliable data from last year. So until we’ve owned them for a year and reported them for a year, we exclude them from the organic growth calculation. Okay.

Let’s wrap it up before we head into the Q and A. Again, the key numbers in line with our guidance and maybe then some. We will continue to focus on organic growth. It’s now set at 7% this quarter and year to date, which is spot on in the middle of our guidance of 5% to 10%. And we will continue to focus on the margin.

We will ensure that acquired entities, they are being incorporated efficiently, again to realize the potential synergies that are identified during the acquisition and during the DD process. We will continue to focus on relevant M and A opportunities. And there are several opportunities identified, but we are again in no rush to do a silly deal. If it makes sense strategically and financially, we will act on it. But if it doesn’t, we won’t.

So it’s all about creating value and enhancing value and doing a smart deal. And we will continue to work diligently to reveal the true value of Amdao to the benefit of all stakeholders. And again, we are heading into a territory with almost $500,000,000 in top line and we are guiding on between 2535% EBITDA for the second half. And you can always do your own calculations and compare the results of your calculations of intrinsic value to the current share price. Okay, that was the presentation.

Let’s head into Q and A. And I think we have received some questions already. Thank you very much. And just thank you, just keep them coming, type them in as we address them and we will attend to them. We have 11 questions so far.

And one of the first question is related to Prosang and it goes to Juswehr. And the question is, and I’ll read it up for you, with regards to the Prosang contract extension with the Karolinska University Hospital, do you know who you were competing against and what were the determining factors that resulted in Omda winning the contracts? Why us?

Gisvario Flappi, CEO/Co-Founder, OMDA: Yes, that’s a very good question actually. And I think it lies in the generic strategy we have when it comes to this very specialized areas where limbs or blood establishment business is one of them. And I think if you look at the history, I think the answer lies there. It started in 1965 and have had the same type of customer dialogues with all these managers of blood establishments institutions in The Nordics. So when they work together and we’ve done that for decades, finding all the important smaller details, entering a process together with us as a vendor to secure that all these details, quality management elements and procedures are handled according to important regulations.

I would say that this process has made it possible for us to have a product that has become probably one of the best in the world. And I think also institutions like Karolinska or Austrian University Hospital for that matter or in Denmark, think that you will see that the strong position we have is what creates that situation. And competition then coming from the outside trying to get into a forty year history of detailed software development. I think that’s the answer. A long answer to a very important question.

Einer, Moderator/Host, OMDA: Okay. Thank you, you, Sohr. We will continue on the markets there. And it’s from Torbjorn. Looking forward, if acquiring a company in the geography where you are not present, to what extent can you leverage existing software platforms and support infrastructure to generate synergies?

And which elements of the cost base will be R and D, hosting, support, sales or whatever. So it’s about the current platform and potential acquisitions in geographies elsewhere.

Gisvario Flappi, CEO/Co-Founder, OMDA: And I think most importantly, it comes to geographies, we have to make sure that if we go into another geography, it has to be within one of the specialties that we already have competence and solutions. Or we can go to add new specialties, but we will not do the same both of them at the same time. So that is the first thing. However, I don’t think in our experience that the synergies between systems, for instance, the different types of platforms is the way that we get our profits. What we do is making sure that we have software delivery and not a platform delivery as such.

For instance, we do not serve the market with services. Normally, the on prem strategy of these complex hospitals are handled by their IT organizations. So from our side, it’s more about the medical procedures or the routines in emergency sector, how to add components together in that country. So this is how we do it. If we acquire something, we increase our value chain components and put that together and increase the offering and then sell it as a software and not as a service.

I think that will be the primary strategy and the way we get synergies on the income side, which is the most important synergy.

Einer, Moderator/Host, OMDA: Okay. Thank you, Svere. Continuing with customers market, there’s a question about churn here. That is the question is, can you provide more insight into why some customers although very few churn, so what happens? Why would anyone be going up?

Gisvario Flappi, CEO/Co-Founder, OMDA: Everyone would like to have a 0% churn, which probably won’t be possible. But we have examples of having a specialized component in one entity and then somebody is merging with another entity having another system, which obviously leads to depending on which is the biggest one and who is the strongest one. So stuff like that happens with some of our components over time. And also, of course, there are some of the systems that have been there for many, many years, maybe also have some bespoke development that is not viable over the next decades that might also be phased out also deliberately by us. However, since the last ten years, it has been below 2%.

And I think it’s just going still going to be types of happenings like that, that will also be the next type of churn, but still below 2%.

Einer, Moderator/Host, OMDA: Okay. There’s a question from Matthew here. I mean, there’s a lot of things you could want and wish for. And I think this was a good one. I don’t know what my answer would be, but if you had a magic wand or maybe if we had it and wanted to get rid of just one problem today, what would it be?

Gisvario Flappi, CEO/Co-Founder, OMDA: Well, to get rid of one problem, I like you, so I don’t want to get rid of you first. So

Einer, Moderator/Host, OMDA: you don’t have anything bothering you at the moment?

Gisvario Flappi, CEO/Co-Founder, OMDA: No, actually not. So I would say that the business is very resilient. And as you all know, whether things are happening in the world, the financial crisis or things happening like with people discussing Trump and changes going on, nothing affects us. And as you know, as Einar mentioned, the recurring revenues actually are now started touching the same level as our fixed costs. And with that low churn, I think everybody now sees that we have a very, very strong position.

So no, actually, we don’t need a magic wand. That’s the answer.

Einer, Moderator/Host, OMDA: Okay. Mean, running a business, there are always challenges and things you could want to improve. But I think it’s important to reflect on the fact that in this world with war, tariffs, customs, shipping, constraints, etcetera, OMDA is very, you know, the underlying demand and our, you know, reason to be here, doesn’t really change very much macro tariffs, etcetera. It doesn’t impact the number of accidents, births, cancer, etcetera. So the underlying demand for Omdas software and services is really very, you know, untouched by all the other events that we read about in the paper every day.

And speaking of understanding the company, is there anything that we would want the or you should want the investors to understand better about Amda. I mean, is it something that we think or you think that this should be obvious for all? I mean, why don’t I get this? I mean, maybe then if the answer is yes, if there’s something that we would like them to understand better, maybe we haven’t been good at communicating it, but is there anything?

Gisvario Flappi, CEO/Co-Founder, OMDA: Yes, I think two things we have not been good at communicating. I think the difference between a target margin talked about a few years ago and guiding. Our first guiding was actually to reach our target margin was done in December 24. So I think that has created some misunderstandings and expectations and impatience so that people actually didn’t see the underlying value creation. So that is one thing.

I think the other is the point I was into about what we are. We are actually having a very unique strategy. And it’s unique in that sense, highly specialized components within specialized healthcare and emergency response. And when we do that and have not only the very strong organic growth potential there, but also profitability, but also the add on mechanism where we have a database of many, many relevant targets for us. So I think to understand that this is not a serial acquirer that just acquire companies, but to really understand what we are doing.

And as I initially came up with, the role we have in society is why every employee in Onda actually get up in the morning And we’re quite proud of that, that the service delivered. This is the reason why the resilience and stability predictability is there in the recurring revenues. So I think to understand more about that read probably more about our type of businesses is relevant to all in addition to probably understand what we’re now saying, crystal clear, we are guiding and we started that in December. And I think that is important for you to understand. It’s crystal clear.

We are guiding these intervals and we stand for that and we’re going to do that for 2025 and 2026 going forward as well.

Einer, Moderator/Host, OMDA: Very clear. Let’s continue with the operations and there’s a question here about artificial intelligence. And the question is, are you seeking to utilize AI within other areas than development? If yes, which ones? And is AI driven efficiency a key driver to reach your employee cost targets of around 50% of sales or does it come on top of any other efficiency initiatives?

So

Gisvario Flappi, CEO/Co-Founder, OMDA: Yeah, that was a

Einer, Moderator/Host, OMDA: long, but very relevant question.

Gisvario Flappi, CEO/Co-Founder, OMDA: I think the most important thing when it comes to AI is, of course, there are two major areas. One thing is the AI on the customer side, which is the delivery of AI or machine learning elements in our own solutions. For instance, back to what I mentioned, every second counts in an emergency setting. Imagine just what we’re now cooperating with the University of Valencia, creating machine learning engine that helps the operator actually make the decision faster. By using all the data.

And of course, that type of functionality is probably both a value creation on the customer side, but the value creation for us adding new types of model modules that is also increasing our recurring revenues. So AI in that sense on our product side is important. It’s not a fast moving AI market for us, but it’s slow moving and all of our customers have actually some kind of AI roadmap in their planning. So that is one thing. And secondly, when it comes to efficiency, of course, we did last year announce that the phase out of a lot of FTEs in The Philippines and also the insuring mechanism for Onda is already done by a lot of processes with AI tools like ChatGPT and Copilot.

And what they’ve been doing, we have an example from Finland where we estimated thousands of hours to convert service stack with old code to new code, which actually was done with 10% of the estimated time using AI tools. So in some areas, there are huge potential. In other areas, for a vendor like us, it’s much more complicated. For instance, algorithms related to calculating a cure, for instance, for cancer medication, we cannot just rely on elements like that. We have to keep our IP and intellectual property and handle that differently.

So there are ongoing many, many activities and part of them are also based on the fact that we have this guiding on the cost side. But I think there are a lot more potential in the years to come based on completely change routines around not only developing, but also testing documentation, etcetera. Long answer, hopefully a good one.

Einer, Moderator/Host, OMDA: I think it made sense. Continuing on the effects of AI and number of FTEs, A question here, how many FTEs from recent acquisitions are included in the February base? How large is the opportunity for efficiency gains as we integrate these businesses? I think I’ll answer that one myself. And of the three latest acquisitions, around $20,000,000 So that is the number.

Efficiency gains, of course, there are scope for efficiency gains. When we do acquisitions, we look at both the cost base and the income side. So there’s always a combination there. And we see that very often, I mean, we have opportunities when we acquire a business, there are opportunities, of course, on the cost base, on the FTEs, on other costs, but first and foremost related to the income side. We utilize opportunities in existing contracts.

Okay. And also further on the FTE side, there’s a question here related to the Filipino consultants. And the question is the Filipino consultants comprise around 10% of the employee base. What is their contribution to the employee cost base? And that is less than 10%, but not so very much less.

So it’s probably less than 5%, but maybe more than three So somewhere around there. But the efficiency there is I mean, one thing is to reduce the use of external consultants, but there are other costs there. The hidden costs is the efficiency in development. So it’s more than just the math is a little bit more advanced. Okay.

And one question about the margin. One question is about the 2024 reported versus the Q4 report last year. And the difference there was just we made a reassessment of the tax refund arrangement in Sweden that was mentioned in the Q4 and also described in the annual report. And the difference is just our assessment of that status. So that was the difference.

I think it’s very well described in the report. Now there’s a question about growth and organic growth, inorganic growth, in other words acquisitions. And the question is, how do you balance inorganic growth with maintaining strong liquidity? This question is also related to another question on the multiples. So I think I’ll try to address both of them at the same time.

Inorganic So organic growth and liquidity, I. E. Cash. The other question here is very similar with 30% EBITDA margin, 10% CapEx and interest cost at 10% of revenue, you have about 10% free cash flow margin for M and A through at an average two times EV sales multiple, this 10% free cash flow only buys around 5% organic growth. How will you reach 10% to 20 inorganic growth?

Relevant question, but there are several things here on the balance. One is, of course, we are growing, so take growth into perspective. So with 5% to 10% organic growth that increases. But there are also, we have said between one and two per time sales that is where we historically have been paying. But again, we are not using sales as a multiple, we are always doing a DCF, but it translates into an EV sales and sometimes an EV EBITDA.

So that is the second thing. It may not necessarily be two times. Third, we are not necessarily paying everything with cash upfront. We have used several methods. It can be some cash, it can be seller credits, it can be earn outs.

There are many ways to skin a cat. So that is the third answer. And the fourth one is, there are other ways of financing this. We have access to the bond market, so we can borrow money as well. So all in all, the 10% to 20% inorganic growth guidance or target is absolutely manageable with the current and future cash position.

Again, a long answer, but I think it’s pretty precise. And speaking of M and A, it’s also about the terms here. And I think I’ll address that one also myself. And the question is the latest M and As seem to be closed at more favorable terms, lower multiples paid, less cash upfront relates to the previous question. What drives this?

Is this a result of the evolution in your M and A philosophy or market conditions are more favorable for M and A transactions? Very good question, very relevant. I think what we have seen, let’s say, let’s go back three or four years, so as you know, the market went a bit crazy And you saw that we, OMDA, we actually withdraw from that because people were just paying too much. We still have the old version of XL. It needs to as I said previously, it needs to make sense strategically and financially, and not eitheror, but both of them at the same time.

And we think there’s more prudence there with sellers. We also see that the market all in all is more prudent, more sensible. And a lot of discussions we have had, we’ve had them with some of the targets for many years actually. And we learned them, they learned about us and we find ways. And again, it isn’t necessarily always cash upfront.

So maybe it’s a better deal for OMDA, but also for the seller, I must stress this, to take some of the years as a seller credit or as an earn out. If you strongly believe in something, I mean, let’s share the joy when we get there. And when we have an earn out situation, it will be very good for the seller, but those earn outs and MAX earn outs are also the best business cases for Ramda. So we share the success. So again, a long answer, but the market is more prudent.

Speaking of, I mean, our M and A, there are you can acquire something or you can build something. We very much have a build or buy strategies there and we are a bit in different and agnostic whether we buy it or whether we build it, what is the best business case. And the question here from Matthew is that, OMDA invest in organic CapEx for additional modules for customers. Are these developments based on what customers explicitly request for? And if so, do they ever co fund development or commit to purchasing the module ahead of time?

I mean, do you just do this at random or is there a plan or actually real demand out there?

Gisvario Flappi, CEO/Co-Founder, OMDA: First of all, it’s of course always a business case. And the business case means you have to have one of those either some customers in a row that wants a module before we start developing it. So there is always a business case. And sometimes it’s a single customer also funding specific modules. But if they are funding it, we will still have the requirement to create not a bespoke development for the customer, but create a product that we can copy paste to put it that way and sell it going forward to other customers.

So most of these components that we have or even you might say even those acquisitions we do might come from a customer as well because they want something added on to their value chain. So both the CapEx business cases and the acquired acquisitions business cases are both doing the same. So yes, co funding is also an ordinary way of cooperating with the customer.

Einer, Moderator/Host, OMDA: Okay, thank you. We have five minutes and two questions pending. So let’s quickly address them. What net debt to EBITDA ratios are you expecting for 2025 year end and 2026? I think you can do the math quite simply.

If again, 500,000,000 in sales, which we’re guiding, we are approaching that and that is where we’re guiding into 2026. 30% EBITDA margin, so that should yield $150,000,000 and then $500,000,000 in gross debt. And at the year end, we had more around $100,000,000 or maybe some more in cash in the bank, so net debt of $400,000,000 So 400,000,000 in net debt and $150,000,000 in EBITDA. So that will be the metric. Okay.

And the question then about another one on M and A. As we calculate return on investment by utilizing a DCF, how do acquisition targets screen on valuation relative to OMDA buybacks versus acquisitions? There’s always the targets, how to screen evaluation. It’s I mean, you can look at past and we may screen and show one result and you can look at the present where they are actually the current trading and they can look at the predictions and budgets and dreams and the hopes in the future. Sometimes people seem to be very more hockey stick like approach to the future.

So it really depends on very often looking at the past, the present or the future. Future. But by and large, I’d say that they it makes terrific sense for us to acquire them. So if it doesn’t make sense financially, we won’t do it. And the last question, and that’s about revenue.

And the question is, would you be able to double your current revenue within the existing countries you currently operate? And I’d say, yes, it would absolutely be possible. If we look back into 2015, our number was a smaller company. We had sales of approximately We are approaching NOK500 million. And we are almost in the same countries.

When we IPO ed, we had NOK200 million in sales, Nordic company, and we are approximately 15% in the rest of the world, but The Nordics at least $100,000,000 So more than doubled in The Nordics already since we IPO ed and I can’t see why we couldn’t do it again. But it isn’t done overnight. It will take some time. Okay. There seems to be no more questions.

I’ve learned that I should wait just a few seconds and refresh some latency. No, there’s nothing more. Okay. We hope you have enjoyed this presentation as much as we have. Tune in again on the November 14 when we will present the results for the 2025.

What a lovely summer it has been. Last time I checked the weather forecast for this fall looks good as well. So thanks for watching. Take care, do your math and stay safe.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.