Earnings call transcript: Omda AS sees Q1 2025 revenue growth, stock surges

Omda AS reported a robust financial performance for the first quarter of 2025, highlighted by a 15% increase in revenue and a strong stock market reaction. The company’s shares rose by 11.62% following the announcement, reaching a price of 49, which is at the 52-week high. According to InvestingPro data, the stock has delivered an impressive 41.6% return over the past six months. Omda’s focus on specialized healthcare and emergency response software has driven this growth, alongside strategic acquisitions and cost optimization efforts. While currently showing strong momentum, InvestingPro analysis suggests the stock is trading slightly above its Fair Value.

Key Takeaways

• Omda AS reported a 15% revenue growth in Q1 2025.
• The company’s stock surged by 11.62% post-earnings announcement.
• Strategic acquisitions and cost optimization were key performance drivers.
• Sweden now accounts for over 50% of Omda’s customer base.
• The company maintains a strong presence in the Nordic software market.

Company Performance

Omda AS has demonstrated significant growth in the first quarter of 2025, with revenue increasing by 15%. This performance is bolstered by a strategic focus on specialized healthcare and emergency response software, as well as successful integration of recent acquisitions. The company’s decentralized business structure and cost optimization efforts have also contributed to its strong financial results.

Financial Highlights

• Revenue: 15% growth in Q1 2025
• Recurring Revenue: 12% growth
• EBITDA Margin: 22%
• Churn Rate: Less than 2%
• Recurring Revenue Annual Run Rate: NOK 373 million

Market Reaction

Following the earnings announcement, Omda AS’s stock price rose by 11.62%, reaching a 52-week high of 49. This positive market reaction reflects investor confidence in the company’s growth strategy and financial performance. The stock’s performance is notable given the broader market trends and sector dynamics.

Outlook & Guidance

Looking ahead, Omda AS projects an organic revenue forecast of SEK 460-485 million for 2025, with a targeted EBITDA margin of 23-27%. The company aims to achieve a long-term target margin of 30% by 2026, driven by organic growth and strategic acquisitions. Omda is committed to doubling its business size through a combination of these growth strategies.

Executive Commentary

CEO Sverre Flagby emphasized the significance of this quarter, stating, "This isn’t just another quarter. To us, it is a defining quarter." The CEO also highlighted the company’s growth ambitions, noting, "We are going to double again through a combination of organic growth and additional acquisitions."

Risks and Challenges

• Market Saturation: Continued expansion into new markets is crucial to sustain growth.
• Competitive Pressure: Maintaining a leading position in the Nordic software market requires constant innovation.
• Economic Conditions: Macroeconomic factors could impact customer spending and growth projections.
• Integration Risks: Successful integration of acquisitions is vital to realize projected synergies.

Omda AS’s Q1 2025 performance underscores its strategic focus and operational efficiency, positioning the company well for future growth in the specialized healthcare and emergency response software sectors.

Full transcript - Omda AS (OMDA) Q1 2025:

Einar, CFO/Financial Presenter, OMDA: Agenda today. We will go through the Q1 highlights. We will revisit the outlook for 2025 and 2026. We will look at the short term guidance and the long term guidance, what can you expect. We’ll go into dive into the financials of Q1, look at highlights from the P and L, the cash flow, working capital and we’ll wrap it up before we go into the Q and A session.

All right. As always, I’m here together with my buddy and long term partner, CEO, Sverdrup Flagby. The floor is yours.

Sverre Flagby, CEO, OMDA: Thank you very much, Einar, and good morning, everyone. This isn’t just another quarter. To us, it is a defining quarter, and it’s a great moment to reflect and look forward. Three significant milestones happened this quarter. And the first one, we officially hit the twenty year mark.

And if you haven’t read our history in the 2024 annual report, which we published in April, please do. It captures our ambitions, our resilience, our staying power that brought us here. So I recommend you do that. That is the thing that brought us to becoming the leading player here in The Nordics. And then this quarter, for the first time ever, we are operating as a fully decentralized business.

And that gives clarity, and it’s easy to work and to reach our new ambitions. And the reason is this is not just a structural change. It is also a strategic one. It unlocks agility, scalability and speed. And so, when we go through the numbers today, you will also see that the financial performance is very, very strong.

And it is not a one off. On the contrary, this is more like a new platform, another platform that we can continue to improve our margin. So all in all, before we dive into the highlights of the quarter, I I think you should reflect on these milestones. So talking about the highlights. 15% growth speaks for itself, but not only that, 12% of our income is growth in recurring revenue.

And in this uncertain world, we are lucky to have such a strong growth in recurring revenues with less than 2% churn. So the income side here is strong, simple as that. In addition, our performance on the profitability side, the EBITDA margin, 22%, a planned step into our target margin and actually on the upper level of our guided interval. But even stronger is the cash EBITDA because CapEx came in slightly lower than guided, meaning that the cash EBITDA is stronger. So these three facts gives us quite another start of a year that we’ve had for many, many years before.

So I guess you will see when my colleague dive into dives into the numbers that this is the very, very good start of 2025. And not only the operations, but also our two acquisitions were closed this quarter, and they bring us new business, new customers and new good products. And the AI company, Dermicus, and the acute health care company, Averia, will contribute to the guiding, a positive guiding for 2024 and not be a negative aspect, although the integration is successfully ongoing. And then this is the facts, this is what happened, and the consequence is, of course, that we look forward. And we have guided.

We actually started our first guiding at December 20 year, and we stick to that interval. So we forecast SEK $460,000,000 to $485,000,000 as the organic business revenue for 2025. And also similarly, we stick to the guiding when it comes to our EBITDA for the year. As you all know, we will have a stronger EBITDA in the second part of ’20 ’20 ’5. So all in all, ’23 to ’27 is what we go for when it comes to EBITA for 2025 in total.

So these are the highlights. And I think it’s time to also reflect a bit on the income side because what is the really important thing if you look at this graph? Well, the darkest one here, 77% recurring revenue is obviously the formal recurring revenue that is ongoing for years with low churn. That’s one thing. But if you look at the second biggest here, 19%, and put those together, you will see that that is also a semi recurring part of our business.

So that means that the summary of those, we have a visibility for ’25 and even into ’26 and the years to come, which is close to 90%. And that is a very strong platform to have when we run a very strong profitable business in 2025 with ambitions to grow further also through acquisitions. So all in all, that is a very strong part of our first quarter numbers that you should have in mind. But then based on the facts and based on these numbers, what about the future? And let me be slightly more specific when it comes to how we see ’25 and ’26 now.

First of all, the growth showed the facts on the left hand side, 15% from the first quarter ’20 ’4 percent to first quarter ’20 ’5 percent. That are the facts. And also the facts on the graph on the right hand side, the first there, ’24, ’4 ’20 ’9. Now we see with the visibility we have that we will reach the intervals published for ’25 and ’26. But remember, that is only the organic, the current organic business.

But of course, we are also going to grow through acquisitions. So the guiding is the same. And if you multiply as a test the first quarter by four, you’ll probably see that the guiding for ’25 is slightly conservative and not a big stretch. And on the margin side, how can we jump with eight percentage points from one quarter to another? I guess you all know that those of you who have followed us for years that we have been working specifically to create this transparent, decentralized organization through a couple of years.

So the work to make this jump was done many quarters ago on many of our good leaders and employees. So this is not what happened in the first quarter. It’s actually just showing the result of long term work. So we’re quite happy with that. That also means, when it comes to guiding, to get from 22 and to our guided interval, 23%, twenty seven % and then, of course, to our target margin, 30% in 26%.

That isn’t that hard if you look at the numbers and where we are at the moment. So we are quite excited about the situation in our organic business and are very thankful for our good employees getting up every morning and work with this important software business for the society in The Nordics and Europe. So we have always gone through our four building blocks, how is actually OMDA’s business model. And those three in the bottom here, you’ll probably see that first quarter twenty twenty five really proves that it’s working. And it’s always like this underlying market growth will be there and will be there for many years.

And as long as we stick to our strict strategy about focusing on only specialized health care, emergency response and highly complex value chains inside those, That is our strategy, makes Onda very unique. On top of that, we get the long term recurring revenue with low churn. And the profitable organic growth you have seen proven in the first quarter is mainly through dialogue with current customers using current contracts in 27 countries, more than 600 contracts. And every day, we work to secure the future that way in our organic business. So now it’s time definitely to focus on the upper part of our business model and to grow faster.

And what we’re going to do is simply look back in our history. We have more than doubled our business since we IPO ed. And the question now is to double again. And we are going to do that through a combination of the organic growth ongoing, as shown in the first quarter, with additional acquisitions. And we will stick to acquire very important businesses that has a role in our complex value chains and has decades behind them with recurring revenues and also a future of recurring revenues as our current business also has.

So that is the strategy, and we are really now happy to start with this profitable growing platform in the first quarter and to continue growing faster through M and A. But now it is a presentation of the first quarter results. So now we are going back to diving into the details of the numbers. And Einar, get going.

Einar, CFO/Financial Presenter, OMDA: Thank you, Sverre. Yes, let’s have a look and dive into the Q1 financials. The attractive revenue diversification continues in Q1. You will see that after we did three acquisitions announced last quarter last year, It has shifted a little, but two of the acquisitions we made were within emergency and one within connected imaging. So you see that those represent, though, a slightly bigger slice of the pie.

And also from a geography on the looking at the geographies, all three acquisitions were Swedish. So you see that Sweden is now represents more than half of the customers are Swedish. And then Norwegian and the rest of the world. So Sweden has really increased in presence. But we’re still a very diversified company, spread over 27 countries with more than 500 different contracts.

Okay, look at this beauty, the recurring revenues. They have been increasing for years and years and reaching million in the quarter and that represents an annual run rate of NOK373 3,000,000. So that is a new record for us. And again, it comes from public sector, public sector like companies, minimal churn and very stable and predictable income this is. The revenue mix continues to be a favorable one.

Software represents 80% of total revenue. We see a stark increase in professional services for the quarter. We have the highest recurring revenue ever. And you will see that we are just on the virtual on the point where the recurring revenue covers all fixed costs in business. And again, very strong professional services in this quarter.

The FTA, the number of FTEs, sorry, is providing visibility for this year. And you see the company cost composition here, COGS is flat in spite of 15% increase in revenues. You see other OpEx is actually going down and lower than our target of 15%. So we are already overshooting there. And nothing specific in this quarter.

We have just trimmed the costs. So we should expect that to continue. The number of FTEs still include approximately 30 consultants from Cebu. You will remember that we will we 20 of our colleagues from Cebu left us the second half of last year, ’30 will remain there until the June year, and then they will gradually be phased out. So and again, we see that total cost around 94,000,000 90 5 million dollars recurring revenue, 93,000,000.

We’re just about there. But by and large, very good cost visibility, cost control in Q1 and going into Q2. EBITDA is in line with our guidance and maybe then some, up from $15,000,000 up to almost $27,000,000 in the first quarter this year. And that’s a leap from 14% to 22%. It shows that the cost initiatives that we have initiated, they actually work.

And the increase in EBITDA is not because we performed any tricks on the CapEx or anything like that. It’s still at 8%, two percentage points below our guided level. So you could say that the CapEx adjusted or normalized CapEx adjusted EBITDA would be at 24%. Speaking of CapEx, all around the same level where it was in this last year, from 9% to 10.4% in total. That includes the PP and E.

But by and large, it’s the same. And the CapEx is, as always, is investment in our own software. And we present business cases for those investments, and we use the same metrics and valuation criteria as we do for an M and A. So it is really a buy or build. We’re a bit indifferent to that, whatever is the most profitable and clever thing to do.

And again, you know that CapEx is below our guidance. So it needs to be a business case before we commit any money to it. The net working capital, it also had record high or should I say low, minus 31% last quarter. It’s still very strong. It’s the third best quarter we had over since the in the last four years at minus 23%.

So again, we are focusing on cash, cash management, net working capital. And more than and we do like prepayment and invoicing upfront annually, semiannually, quarterly. And we have a target of an NVC of minus 10% or better. So we are well within the guidance there. And there’s a substantial improvement you see from the first quarter twenty four to the first quarter twenty five.

That said, you will if you look at the cash in the balance sheet, you will see that, oh, what happened here? It’s really very explainable where is the cash. A large part of it is due to we have acquired acquisitions. They have to be paid for. And we have delayed some invoicing on some of the newly acquired entities in order to improve performance and maybe do some increases.

So improvements, improvements, improvements, that is a large part of the explanation. If you look at the business areas this quarter, we see they all performed well. So there are differences between them. Some are more profitable, some grow faster, but they all performed well. So the 22% EBIT margin isn’t like due to one business area overperforming and the rest being lackluster.

On the contrary, they are all performing contributing. You see a difference there, for instance, on CapEx. Some places, we invest more. Some places, we don’t invest so much at all because there isn’t a business case. Or as for medication management, they are so busy implementing all the orders they’ve already had.

And you see also difference there on, say, Health Analytics, very strong EBITDA, zero CapEx, zero growth, but all in all, a contributor overall. So individual differences, but they’re all contributing. And that’s a comfort, isn’t it? All right. Time to sum it up.

So the key numbers, they are in line with our guiding and maybe then some. And we will continue to focus on organic growth and on the EBITDA margin. So will continue, I can promise you. We will ensure and work hard to ensure that the acquired entities are being incorporated into OMDA in an efficient manner by integrating build methodology. We have optimized that, refined it, fine tuned it, and we continue to do that, Kaizen.

So one thing typically we’ll look at whether we acquire a new business is to improve net working capital, cash management, invoicing to see and explore unused opportunities in the contracts, all those things. No, we have not forgotten about M and A. We are working on that every day. We go to bed thinking about acquisitions, and we wake up in the morning thinking about clever ways to accomplish them. But it takes two to tango.

And we don’t we have we’re not in a rush to pay too much for something that isn’t worth it. So discipline, discipline, discipline. And then when opportunity is there, boom, we will strike. All right. And so all in all, we will continue to work focused and diligently to reveal the true value of Amdahl to the benefit of all stakeholders.

So and until the share price reflects the underlying value, we will not rest, we will not sleep, we will continue to march on. Won’t we, Sverdrup?

Sverre Flagby, CEO, OMDA: Of course. I’m marching already.

Einar, CFO/Financial Presenter, OMDA: All right. That was the end of the presentation. And now let’s have a look at the Q and A to see if there are any questions or and there are some questions. And a lot of them seem to be financial, but I’ll start with one so for you, Sverre. And that is from Jonathan Curtis.

And he says, Hi, you remarked decrease in valuation of acquisition targets during the last call. Is this the case so far? Maybe it was a bit to me as well. I agree. I thought it was on acquisitions.

All right. Would maybe not valuation, but we what we said last time was that, yes, we think that the hype that was there a couple of years ago that is gone. So I would say it’s more sober and more realistic. But of course, the seller wants a higher price, the buyer wants a more reasonable price. But I think as we saw last year, it was possible to meet expectations on both sides.

And we still see that all the targets we are discussing with should be possible to reach an agreement there. Okay. And then the next question, this one is for you, Svere, and that is with respect to the past acquisitions. What are some lessons learned from past acquisitions and integration? Is it anything you would avoid in the future?

Sverre Flagby, CEO, OMDA: Yes, actually, is. And it’s a good question. And since we’ve made 17 acquisitions, we’ve learned a lot actually. And I think one thing we have learned is that we have had a structural structural methodology called buy, integrate and build, and we follow that two year plan. We have seen that in many cases, there are possibilities to speed it up.

And that is what we have learned that we have to look at each and every target in more detail, look at contracts, customer relations. And as Einar mentioned, actions like awaiting invoicing for a year of recurring revenue to secure that the right things are done like CPI or added price, etcetera. So all in all, yes, we’ve learned a lot. And I think we will try to avoid having a too standardized approach, be more focused on the actual characteristics of each target. So that, I think, is the most important lesson learned.

Einar, CFO/Financial Presenter, OMDA: Okay. Thank you, Sare. There are a few other questions here. And there’s one from Benedicte. And it’s can you elaborate on where the cost cuts come from and how sustainable they are?

And I would like you to answer this, Harry, because did we do anything special in this quarter? Did we do any trimming specifically for this quarter? Or

Sverre Flagby, CEO, OMDA: what happened? Good question. I mentioned it briefly, but no, actually none of these actions have been taken in the first quarter at all. So they’re all sustainable and based on a long term plan, started actually in 2022 when we decentralized the specialized health care of OMDA. And in the second half of ’twenty four, we decentralized the emergency part of OMDA.

And the combo of that is a sustainable platform and even more potential going forward for margin improvement because there are still some consulting costs, etcetera, that will be removed. So I would say it’s sustainable and even has a better possibility for margin improvement going forward as well.

Einar, CFO/Financial Presenter, OMDA: Okay. You hear the fire alarm in the background. That’s great. Yes, we didn’t know the numbers were so hot. Okay.

Let’s continue on the question on acquisitions. And the question there is, can you comment on your profitability requirements when evaluating new acquisitions? And that is an interesting question. But the thing is when we do when we evaluate a new acquisition or a new target, we don’t mind if it’s not profitable or if it’s unprofitable, turn a better or turnaround candidate, we really don’t matter to us. Some of the best acquisitions we’ve done, they have been turnaround candidates.

And but what we do is we look at the current business and the cash flow from the current business. We see what synergies that we can add on the cost side or on the income side, how can we improve the business because it’s all about what will the business and what will the cash flow look from now and in the future. We’re not buying into the past, we’re buying into the future. So how can we improve it? And if you think that there is a room for improvement, there is a potential that is unlocked or that we can unleash, we will go into it.

On a general basis, I’d say we like to identify the cash flows, discount them over a period of seven years, add a terminal value if it’s reasonable to do so and discount this cash flow with a WACC of 12%. So that’s how we do it. And the same thing we do when we do CapEx projects. So very simple math. Okay.

There are four more questions. You can continue to type in questions if you have any. These the next questions, they are also related to financial things. So I’ll just take them one by one. One from another one from Benedict.

How do you expect net working capital to develop in the next couple of quarters? Okay. We will continue to focus on net working capital. Again, the upfront invoicing, annual invoicing is like a one thing. If anything, we’ll see that it will improve on the acquired businesses.

But at the same time, the pattern you see from net working capital, maybe we can bring it up on screen here if production, yes, there we go. You see there is a seasonality there. We typically invoice a lot just before Christmas in the fourth quarter. And last year, we were very active and it was paid in before Christmas. So around the new receive, so to speak, will always be very cash rich.

And then because a lot of it is invoiced annual upfront, we will deplete those cash reserves through the year and typically be at the lowest in the third quarter. So that seasonality will remain. But apart from that, we think that, on average, we will fare better this year and improve as compared to last year. Okay. And then the question related to this one from Alex.

What do you expect the cash free cash flow conversion rate to be? And the simple answer is, let’s say, if you look at cash from operations, you see the EBITDA, and then you knock off approximately 10% CapEx. And then you and that is the that will be the cash flow from operations. And then we have some financing costs, interest costs. And as we are now approaching million in sales, and the interest on the bond is three month LIBOR plus 600 bps, so say around 10%.

So you knock off another 10% and the rest is yours or ours. So think of it that way. Okay. I’m trying to archive this one. Yes, there are a little break from all the financial questions.

There’s a question here from Jonathan for Juswehr, and that is about cross selling opportunities. The question is, hi. Any cross selling opportunities, example of past acquisitions to share with us? So what can you say? And cross selling, how does that work in OMDA?

Sverre Flagby, CEO, OMDA: Well, as I mentioned, when it comes to our M and A strategy, our focus is on value chains. And as we presented in the December 20, when we focused on the emergency acquisitions, you will see that we add components into a value chain, meaning that we address more users than we have from earlier. So that means, for instance, the last two acquisitions within emergency being Predicare and Averia, both very important add on modules like Predicare, which is decision support and triaging methodology, while Avera focused on developing a software that supports the acute care part on acute hospital. So then we go from a planning and emergency business to into the operating the callers, the call takers who administers the calls and make a decision as soon as they can and then address the situation with a decision, for instance, sending an ambulance, a helicopter, etcetera. And then the patient will go into an acute area.

So before we acquired Averia and Predicare, we didn’t have that part into the acute room. So that is how we add the value chain and to the specific answer cross selling. Cross selling in Onda would be that the customers that has these components inside, for instance, the acute area could have the use of the other types of components, for instance, in the ambulance or the other way around. So that is how we do it. So cross selling is not that a customer that has a type of software within cancer suddenly acquire something within maternity.

So that is not cross selling. Cross selling is within value chains through acquisitions, new customers that could add new components and all the customers could acquire new components. That’s how we do it.

Einar, CFO/Financial Presenter, OMDA: Okay. Thank you, Sverre. We have two more questions pending. But if you have any more questions, please type them in. We really appreciate the opportunity to have the dialogue with you and your engagement.

So now is the time. Okay. And I said there were a couple of more questions on finance. And one of them are related to the growth plans. And the question is how do you intend to finance your ambitious growth plans?

And that’s a relevant question. And in OMDA, if look back, you see that we have grown from back in 2015, we had sales revenue of million and we are now approaching NOK 500,000,000, so 10 times bigger in ten years, kind of, And we have done this through organic growth, 5% to 10% per annum, 7% the first quarter this year and through M and A. And when we have acquired businesses, we have, of course, I mean, you can pay something upfront. We haven’t done so many equity issues. We have used leverage and we still do.

And we also used creativity and other tools in the toolbox such as earn outs or seller credit, vendor notes, etcetera. We will continue to be as creative as possible to make the most out of it. So but again, seller credit earn outs may not be suitable for all transaction types. Typically, it’s more relevant when we deal with entrepreneurs or people are going to continue to work here rather than a more industrial seller. So it’s very contingent upon the targets, what kind of financing we do.

When it comes to leverage, we have $500,000,000 outstanding on the two Pro. There is a tap issue there that allows us to double that. So there is an untapped potential literally when it comes to the bond. But of course, we need to meet certain criteria. But with the results that we are displaying for the first quarter, if that continues and we maintain and meet our guidance, that problem or that challenge will absolutely be possible to overcome.

That said, we have no plans for any equity issue, no plans at all. So that is not on the option list. And speaking of debt and equity, that takes me to the last question. So if you have any more, is the time to type it in while we address the last question. And that was that last question is related to debt.

Could you give some guidance for your net debt to EBITDA ratio for the next twelve and twenty four months. That is relevant because in the bondholder agreement, there is an incurrence test that we need to meet or exceed in order to utilize the TAP issue. But let me do let us do a little flip side of an envelope calculation together. We for the first half year this year, we said we will have an EBITDA margin of between 1822%. We said that for the second half of this year, we’ll be between 2535%.

And this is the one, yeah. And that is this year. And that means that if we’re there, we’ll be in the 30% EBITDA margin for second half of this year. And our guidance is that we will maintain that level heading into 2026. So a simple flip side of an envelope calculation, euros 500,000,000 in sales, 30% EBITDA, that’s SEK 150,000,000 with a net debt of, say, around SEK 400,000,000.

4 hundred million divided by SEK 150,000,000, less than SEK 3,000,000, do the math. So that is probably the best answer I can give. We are with the speed, the current run rate and speed running at, we are quite rapidly deleveraging the company. Okay. Another question coming while we address this one.

Thank you, Alex. Appreciate it. This is currently the last one. Do you have any debt repayment or refinancing needs in the next few years? The simple answer is no.

We have OMDA zero to approve too. That’s ’s a build of loan. It matures. We it’s a five year. It’s so in we probably it’s December 28.

And before that, we only have to service the interest and that’s it. And then we have seller credits in but that is really a beautiful thing because it’s it will be self financing. So both the seller credits we have already announced, they’re always linked to sales and cash EBITDA. Okay. So that’s a simple answer for that one.

And yes, they keep coming and that’s a good thing. Thank you, Jonathan, for being engaged. You guys have guided five The last question. All righty. As there seems to be no more questions, we time to round off.

We are a bit ahead of time, but that gives us a little more time to further improve the business. Hope you have enjoyed this presentation as much as we have. Tune in again on the August 29 when we will present the results for the second quarter of twenty twenty five. And until then, spring is unfolding. Days are getting longer and things are indeed looking brighter.

So thanks for watching. Take care and stay safe.

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