Earnings call transcript: Sealy Q2 2025 reports revenue decline and strategic shifts

Sealy reported its second-quarter earnings for 2025, revealing a revenue decline amid a challenging market environment. The company posted a second-quarter revenue of €27.6 million, a 6% decrease year-over-year. Despite the drop in revenue, Sealy maintained a strong balance sheet with an equity ratio nearing 50% and a healthy current ratio of 1.31. According to InvestingPro analysis, the stock appears undervalued at current levels, with a moderate debt-to-equity ratio of 0.47 supporting its financial stability. The company’s stock responded to the earnings announcement with noticeable movement, reflecting investor sentiment towards its performance and strategic initiatives.

Key Takeaways

• Second-quarter revenue decreased by 6% year-over-year to €27.6 million.
• Sealy launched an AI advisory service and acquired Integration Group.
• Planned organizational restructuring may lead to a workforce reduction affecting 250 employees.
• Full-year revenue guidance set between €108-130 million.
• Market challenges persist, particularly in the automotive sector.

Company Performance

Sealy’s performance in the second quarter of 2025 was marked by a revenue decline, attributed to a challenging macroeconomic environment and slow decision-making from clients. The company is focusing on transforming into an AI-driven service provider, with recent acquisitions and product launches aimed at enhancing its capabilities in this area. Despite the revenue drop, Sealy’s strong equity position and near-zero net debt ratio highlight its financial resilience.

Financial Highlights

• Revenue: €27.6 million, down 6% year-over-year.
• First Half Revenue: €57.5 million, down 2.8% year-over-year.
• Second Quarter Adjusted EBITDA: €1.3 million, with a margin of 4.7%.
• First Half Adjusted EBITDA: €2.6 million, with a margin of 4.5%.

Outlook & Guidance

Sealy provided full-year revenue guidance ranging from €108 million to €130 million and adjusted EBITDA guidance between €4.7 million and €7.7 million. The company remains focused on AI data services and improving profitability. InvestingPro analysis reveals multiple positive indicators, including expected net income growth this year and a strong free cash flow yield. However, Sealy does not anticipate an immediate market recovery and continues to navigate uncertainties in global trade and the automotive sector. For deeper insights into Sealy’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Executive Commentary

CEO Tomi emphasized Sealy’s commitment to strategic execution and profitability improvement, stating, "We aim to support better our strategic execution and to improve our profitability." He also expressed optimism about future market conditions, noting, "Sooner or later, the market will pick up."

Risks and Challenges

• Market Environment: Sealy faces challenging macro demand conditions and slow client decision-making.
• Automotive Sector: Continued difficulties in the automotive industry could impact international business.
• Workforce Restructuring: Planned organizational changes may lead to workforce reductions, affecting employee morale and operational efficiency.
• Global Trade Tensions: Uncertainty in global trade could impact Sealy’s international operations and revenue streams.
• AI Transition: While focusing on AI services, Sealy may encounter integration challenges and require significant investment in technology and talent.

Q&A

During the earnings call, analysts inquired about the limited productivity gains from AI initiatives and the stabilization of pricing levels. Sealy’s exploration of entering the defense sector was also discussed, although no immediate market turnaround is expected.

Full transcript - Siili Solutions Oyj (SIILI) Q2 2025:

Tomi, CEO, Sealy: Welcome to Sealy’s result info for the 2025. My name is Tomi, and I’m the CEO of Sealy. And today, we will go through the key highlights of the first half and, of course, the numbers as well. And I have here today with me our CFO, Alexey, and he will tell you about the numbers later in this session. And today, we have a few topics on the agenda.

So first, I will talk about the highlights of the first half. Then Alex will go through the numbers, and then we look at a bit on the how the future of Sealy looks like. And in addition to the kind of standard topics on the agenda, we announced today that we are planning to change our organisation model, and we will update you on that as well. And before we get to the first half of this year, maybe a bit update on CELIA as a company in case it’s not familiar to all of you yet. So our services cover the whole value chain from exploration, data AI development and test automation, the maintenance.

Our key client sectors include services, industry, public and finance. And our key markets at the moment, Finland, U. S, UK and Germany. We also have four specialised Sealy companies, Sealy subsidiaries focusing on what they each can be best at. And our subsidiaries are Supercharts, which is focusing on innovation solutions, then Sili Auto focusing on car, HMIs, Voila focusing on quality assurance and integration group focusing on integration.

Our client base is diversified. And typically, we have a very long lasting client relationships. Mainly, we work with pick and mix us organisations, either in the public sector or on a private sector. And more than 90% of our revenue is time and material based. Our slogan is Make AI Real, and that captures the essence of our strategy.

We updated our strategy roughly a year ago, And then we took the AI in the very centre of our strategy. And we are in the middle of transforming the company, focusing more and more on AI as well. Fundausterity, so these elements are the elements that have been there already quite some time, so nothing new on these. So the target clients segments are the same as they have been. The industries and the markets have been the same already quite some time.

And of course, our values, we haven’t made any changes on our values. And then a year ago, we updated our strategy and took the AI in a very centre of our strategy or data and AI. And we identified for ourselves three key things in first, the community of top talent. And, okay, this is not a new thing that has been there already earlier. And our aim here is to become the best AI driven community for humans.

Then the second significant growth in data and AI business. And third, to be a pioneer in AI powered digital development. Then moving on to the changes that we announced earlier today, and I will go through the key things that we announced today. First, we are planning to and we go through the change negotiations. So all this is on a planning mode at this point, so no decisions made yet as we go through the change negotiation process.

But the plan at the moment to first of all, to simplify our structure. So we are moving a simpler organisational structure, which is based on current competence communities and teams. Second, sales will be strengthened with more subject matter expertise, and we started this already earlier this year, we launched our advisory service, AI advisory service, which is exactly this. And we are recruiting all the time more and more principal consultants who have the subject matter expertise as their main competence area. Then the third point, we are organising ourselves or planning to organise ourselves around the three different client need types.

And I will explain this later what we mean by this. And this is too much better on the demand on the market and what different client needs there is. Also, we continue to adjust our competence profile to match our better our strategy as well as the needs on the market. And all this, we are implementing through change negotiations. And within the change negotiations, the scope is roughly two fifty people.

And our current estimate or maximum current estimate of the reduction needs is 47. And we are expecting roughly 1,000,000 to 4,500,000.0 annual cost savings as a consequence of this process. And then if we put this a bit on timeline that what we have done earlier and what where we are now and what are the next steps. So the timeline here starts a year ago when we implemented or announced our new strategy and put the data on AI in the very center of that. And then after that, we have identified the strategic focus areas where we will be focusing and have been focusing.

Earlier this year, we aligned our support functions to be better aligned with the market situation. And now we are aligning the technical competencies and structure with our strategy. So that’s basically what we announced today. And we are expecting to get this process implemented by the mid September, and we should be fully operational by the October this year. And then if we look at the how what changes we are making from the strategy perspective.

First of all, that our this is not a news slide. We’ve been showing this already earlier. So our goal is to help our clients to become AI leaders in their own industries. And at Sealy, we support our clients on their own AI powered journey and truly, of course, all the steps on that journey. And how that reflects to the different client needs.

So now in the picture, the green boxes, those are the needs where typically the client is after a faster time to market. And typically, they buy competence and delivery capacity from us. And as well now as the AI is part of the equation, the process innovation in the development is something where we are very good at, and that’s kind of advisory the clients are asking from us regarding the development process. So that’s the green boxes in the picture. Then the blue boxes, they’re the driver for client typically is new revenue streams, and the their maturity level is typically lower.

And then as a consequence of that, then on the kind of areas of the blue boxes, they typically want to buy end to end solutions from us. And now with the new organisation set up, we are matching these two different types of client requirements. And then the third typical requirement is the maintenance or running. So there, we run the services that we have built, and that’s the continuous services we provide. And there, the driver for client is typically reliability and efficiency.

And then if we look at this from the kind of organisational setup point of view, so we are now organising or planning to organise ourselves based on these three different client need types. And also, the way we sell is obviously different in each of these types. So the first, the creation that’s a working title now. But anyway, the creation part of the whole thing is value driven. So there client is after the new revenue, new services, and typically, they buy it as an end to end solution.

Then the second, the development, that’s more mature from the client perspective. And there, they typically buy the delivery capability from us, so in practice, and individual experts in some cases. And the sales model is different in both of these cases. So in the development, it’s typically a competence driven. And then in this creation or solutions, then it’s typically a value driven sales.

And now we are organising ourselves based on this logic. And then the third element is the running service or the continuous services, and that’s typically SLA, so service level agreement. So applying this after stability and efficiency on running the application landscape. And then moving on to the highlights of first half and second quarter. First of all, we focused or have been focusing on looking after our overall offering and kind of transforming ourselves to more and more towards the data and AI.

And yes, of course, it takes time because we have other services in our portfolio. Also and we launched the advisory AI advisory service earlier this year, and that was one of the things taking us towards that direction. Another concrete step where we acquired the integrations group earlier this year, and we are updating our competence profile to better support the strategy as well as the market demand. And of course, we are strengthening our data and AI expertise. And for instance, roughly 400 CIIs have completed our AI development course during the first half of this year.

Then looking at the numbers, and Alexey will go through the numbers in more detail, but on a kind of high level. So the first half, we made roughly million revenue, and our EBITA was 4.5% and international revenue a bit more than 26%. And then looking at the second quarter, the same numbers. So we made 27,600,000.0 revenue and roughly 4.7% EBITDA, and the international revenue was roughly 25%. And now I hand over to Alexey, and he will go through the numbers in more detail.

So Alex.

Alexey, CFO, Sealy: Thank you, Domi. Let’s take a quick review to our financials, mainly to revenue, profitability and then a few key figures from our balance sheet. The picture on top here showing our first half, second half revenue from 2016 up to end of first half this year. During the first half, as already mentioned, our revenue was EUR 57,500,000.0 and respectively, minus 2.8% compared to first half last year. From the picture below, you can see the quarterly revenue from quarter one twenty twenty one until quarter two this year.

On second quarter, the revenue drop was roughly minus 6% from a comparison period. In general, the market continues to challenge us, and we saw revenue decline on second quarter across the group, however, mainly on the international side. Of course, revenue was partly the revenue decline was partly driven by lower number of working days during the second quarter. Moving to the international revenue side. First half was here more challenging than last year, with lower revenue by roughly minus 10% compared to last year.

Overall, the revenue share was over 26% of total group revenue, so still exceeding 25% share from the group revenue. Our focus has been in securing Sealy’s profitability in the tougher market environment. First half adjusted EBITDA was EUR 2,600,000.0 and adjusted EBITDA margin, 4.5%, as shown by the picture on the top. We initiated cost savings during the first half, and this clearly supported our profitability. Looking at the quarterly profit.

The second quarter adjusted EBITDA was EUR 1,300,000.0 and four point seven percent profitability margin. There was a decline from last year, roughly one percent point. However, we have improvement in the profit margin level when we compare to the quarter three and the end of the last year on a quarterly basis. Looking ahead, we’re determined and committed to continue our strong efforts to improve our profitability towards our long term financial target. Our capacity at the end of first half was roughly 1,000 employees and subcontractors.

We have adjusted our capacity, and the decline in headcount from the end of last year was primarily driven by the changed negotiations carried out during first half. Our focus remains in improving our operational efficiency while we maintain the recruitment activity in our core areas like data and AI competence. Finally, review to our balance sheet. We continue to retain strong financial position and healthy balance sheet. Our equity ratio grew to almost 50% from 47% at the end of first half last year.

Our net debt ratio was close to zero and in line with last year. So overall, Sealy has good financial position to move on with our strategy execution. And now over to Tomi and going forward. Thank you.

Tomi, CEO, Sealy: Right. Now if we a bit look on how we are looking for the next steps for Sealy. For the whole year, no, is not the new slide. So our focus this year has been on two things: executing our services or meaning scaling up the AI data and AI and second, to improve profitability. And this is our agenda for 2025.

And the actions that we announced earlier today are obviously in line with these two targets. So we aim to support better our strategic execution and to, of course, to improve our profitability as well. The guidance, just to recap on that. So our guidance for this year, no changes here. So guidance is revenue between CHF108 million to CHF130 million and the adjusted EBITDA between CHF4.7 million to CHF7.7 million.

And our when we have given the guidance, our expectation then was that the macro demand environment remains unchanged compared to 2024. And we do not see any changes or changes on that. So the market has been difficult. And as far or as we see it also from now on that we don’t have any signs, at least not at the moment, that the market would kind of pick up or become any easier than what it has been. And the AI, of course, the implementation speed of AI, it’s obviously a relevant question for us, of course, as well.

That was all we had today. And now we are happy to answer any questions you may have.

Alexey, CFO, Sealy: Right. And as previously, you can send your questions via Teams’ Q and A link. And we already have quite many questions here. I think there are several questions covering the AI and the impact to the efficiency. Maybe we can start with that one.

So the question is that, if I read it, how much the use of AI has improved the productivity of your own workers? And are you seeing such a productivity leap creating more overcapacity to the market, I. E, the amount of available hours growing more than the actual demand? And there are other questions from the AI efficiency impact.

Tomi, CEO, Sealy: Yes. So the mainly our not just our, but the business logic and the invoicing logic in this industry has been mainly time based, so hourly hourly based, and that hasn’t changed. So then then the how we gain the productivity or the productivity gains we get is basically that we split the gains then between ourselves and our clients. And then it depends on the that when we do kind of fixed price projects, then of course, then it’s easier for us to benefit on the productivity gains brought by AI. And it also it varies quite a lot on the for instance, that we still have clients who are not willing to use AI, we that’s a limitation itself.

Now then we have clients who are willing to use it, but in a very limited scale. So, we are not in a full scale or anywhere near in a full scale at the moment. It’s more still not experimenting anymore that now it’s I mean, that it used to be is a proof of concepts and now it’s a kind of real life. But still, the scale is, let’s say, rather small. And it’s not kind of that straightforward that we can say that, hey, the productivity has increased this and that much because then it goes back to the invoicing logic.

The I mean, traditionally, this industry has been based on the time based invoicing, and it takes time that will change.

Alexey, CFO, Sealy: Right. Then we can see a few questions about the pricing. Maybe we take that one. Any comments on the customer price levels if you compare to the front book versus the back book? Have the prices in public tenders continued to slide?

Tomi, CEO, Sealy: Yes. But no, the prices have dropped. Now that’s not a surprise or secret that do they continue to drop? No, I wouldn’t say so. So at least how we see it is that we that the environment that, yes, the environment is tough, but that it would have been getting worse or that we would see that it would still get worse that we don’t see such development.

So in the market perspective and that, of course, reflects the prices as well that now, I would say that it’s rather stable. But like I said, no kind of any significant signs that it would improve. And like I said, we have been prepared for this already when the year started. So when the year started, we did not expect that the market would get any better this year. And that has been the I mean, that has basically been how the market has developed.

So it’s not a kind of surprise to us, but of course, it’s something that we have to step by step adapt ourselves.

Alexey, CFO, Sealy: Right. Then international business, the decline in international business on second quarter was steep. What was driving this? Any commentary on Seeley Auto versus Supercharge?

Tomi, CEO, Sealy: Yes. Yeah. No. That’s true that the that if I look at the the kind of history in a bit longer term, our international revenue has typically been stronger than the or the revenue development outside Finland has been typically stronger than in Finland. And now it’s not the case on the second quarter, and that’s sort of kind of well pointed there or picked.

And regarding the international business, we basically have two kind of elements there. The Seeley Auto, which is not purely focusing on on automotive and then supercharge. And automotive no. The situation in automotive is is difficult. The tariff discussion, for instance, goes kind of left and right every week, and that has created uncertainty on the market.

And that, of course, reflects to the demand on that simply because of the uncertainty. And that you can see in our numbers as well. Okay, supercharged, yes, we have challenges there as well, but really, although the automotive is the main driver of the challenges outside Finland at the moment.

Alexey, CFO, Sealy: Continuing from here, actually, going to the global trade tensions. I think you already partly answered to that. But are you seeing the global trade tensions having direct impact on the customers’ decision making, especially in the international business. But I guess we

Tomi, CEO, Sealy: Yes. No. Yes. We can see that. So it doesn’t impact us directly, but indirectly because of the, let’s say, the the bigger and the more international the client, then of course the uncertainty it’s pretty obvious that the uncertainty is there and that reflects on their buying behaviour.

Alexey, CFO, Sealy: At least not helping or supporting the Yes. Market on that side. Not helping. Yeah. Yeah.

Then there is question from the defense sector. How fast the market in defense sector is evolving? How easy is it to penetrate to this client vertical? And can you penetrate the market in the coming twelve months?

Tomi, CEO, Sealy: Yes. Defense sector is very defensive in terms of the that it’s not easy market to enter. And we have kind of a few angles. We are trying to enter the defence market and no, but as it’s kind of built in the question that, yes, it’s not easy market to penetrate. And the ways we are trying to penetrate the defense market is, one, is the automotive because there let’s say that there are a lot of of course, the automotive is completely different than defense, but but there are a lot of similarity.

I mean, the the requirement level is very high and the competencies we have, so basically, the HMIs for cars, that’s let’s say, in principle, it’s easy to adapt on on the defense. But the But what slows it down is that we don’t have references on the defence, and that then depends on the client case, that how easy it is to enter the defence sector. And the first steps we are taking are not directly the so basically, we are aiming the subcontractor role because that’s clearly the easier step and then step by step to kind of build our position. And that’s, by the way, exactly what we have done. That was a long time ago.

But anyway, automotive that now the big automotive companies, Mercedes, Volkswagen, etcetera, are directly our clients. And that obviously wasn’t the case when we started the automotive. And now we are, of course, exploring the exactly the same route towards the defense, but it’s it’s not the fast track to to do.

Alexey, CFO, Sealy: Alright. Then we have few questions about the new billing process that we announced. Actually, that wasn’t the billing process to Seeley. It was a work that we carried out to our customer. So hopefully hopefully Yeah.

It was in the

Tomi, CEO, Sealy: in the press release that yeah. So we have worked on a customer or client’s billing process.

Alexey, CFO, Sealy: Yeah. True. Yes. I think we have pretty much covered the all topics that we have currently in the questions. Well, maybe

Do you see signs of market turnaround? That’s one question looking ahead.

Tomi, CEO, Sealy: Jan, no, we I cannot say that we see signs of turnaround. But let’s say that, to me, it seems obvious that sooner or later, the market will pick up because there’s a development debt that the clients are building basically every every day. So things are postponed or the decisions are are slow. And then at some point, the the there are kind of things that, you know, in practice are are kind of they are forced to replace something or update something something and build new integrations, etcetera. So sooner or later, the market will pick up.

But when, that’s no, it seems to take time.

Alexey, CFO, Sealy: Alright. There is maybe one question from the employee net organic employee growth that when do you expect net organic employee growth for the entire Sealy reflects to the market turnaround as well and going through the structural change here. So probably hard to

Tomi, CEO, Sealy: Yeah. I know hard to estimate because now we are of course, you won’t see it on the net numbers that we are recruiting all the time very actively on the areas that are growing, so meaning no data and AI, for instance. And then there are other parts of the business that are not growing. And then, of course, the net what you cannot see from the numbers outside is the kind of transition between these two. And that when obviously, the market behaves, that has, of course, a big impact on that.

And that’s difficult to estimate. But we have been focusing on kind of making sure that our efficiency is on a proper level. And then whenever the market will pick up, then, of course, that will kind of we will benefit on the improved efficiency and also that we are transforming the confidence profile of the company and that will serve us whenever the market will pick up.

Alexey, CFO, Sealy: Think that’s it. Believe we have covered at least all the topics, and there are no new questions at the moment.

Tomi, CEO, Sealy: All right. Thank you for this session and for the good questions as

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