Earnings call transcript: Talenom Oyj Q2 2025 sees steady growth amid digital push

Talenom Oyj reported a moderate increase in net sales for Q2 2025, driven by a strong performance in its accounting and software businesses. The company’s stock saw a slight decline in pre-market trading, reflecting mixed investor sentiment. According to InvestingPro analysis, Talenom appears undervalued at its current market capitalization of €191.88M, with a notably low PEG ratio of 0.25. Talenom’s strategic focus on digitalization and expansion into new markets, particularly Spain, underscores its growth trajectory.

Key Takeaways

• Net sales increased by 3.1%, reaching nearly €35 million.
• EBITDA achieved close to €10 million, with a 28% profitability margin.
• New software brand "Yasar" launched, targeting SMEs and professionals.
• Spain’s market presents significant growth opportunities due to e-invoicing mandates.
• Stock price decreased by 2.02% in pre-market trading.

Company Performance

Talenom Oyj demonstrated steady growth in Q2 2025, with net sales rising by 3.1%. The company’s performance was bolstered by an 18% increase in sales in Spain, despite a 9.5% decline in Sweden. The firm continues to benefit from its dual focus on accounting services and software solutions, positioning itself well in the digital transformation landscape.

Financial Highlights

• Revenue: €35 million, up 3.1% year-over-year.
• EBITDA: Nearly €10 million, with a 28% profitability margin.
• Finland sales: €23.5 million, a 4.6% increase.
• Spain sales: €4.7 million, an 18% increase.
• Sweden sales: €6.5 million, a 9.5% decrease.

Outlook & Guidance

Talenom projects full-year net sales between €130 million and €140 million, with an EBITDA range of €36 million to €42 million. The company aims to enhance profitability in Sweden and capitalize on Spain’s e-invoicing market. Additionally, Talenom plans to expand its software-as-a-service (SaaS) capabilities. InvestingPro analysis reveals multiple positive indicators, including strong free cash flow yield and attractive valuation metrics. Subscribers can access 6 additional ProTips and comprehensive financial analysis through the Pro Research Report.

Executive Commentary

CEO Ottebecka Huftalan stated, "We are well positioned in Spain to benefit from the invoicing reform," highlighting the strategic importance of the Spanish market. CFO Matti Elonem expressed confidence in profitability improvements, noting, "We believe that we have good possibilities to increase our profitability in the second half."

Risks and Challenges

• Market saturation in Sweden could hinder growth.
• Economic fluctuations in Europe may impact demand.
• The transition to digital platforms requires significant investment.
• Regulatory changes in key markets pose compliance challenges.
• Competition from established digital service providers.

Q&A

During the earnings call, analysts inquired about potential software investment reductions and acquisition opportunities in Spain. Management confirmed capacity for acquisitions and emphasized a focus on maintaining covenant levels, with no significant cost-cutting plans anticipated. With a solid Altman Z-Score of 6.43 and manageable debt ratios, InvestingPro data suggests the company maintains strong financial health to support its growth initiatives.

Full transcript - Talenom Oyj (TNOM) Q2 2025:

Ottebecka Huftalan, CEO, Telenom: Hello. You are welcome to follow-up Tallinnum h one report release. My name is CEO Ottebecka Huftalan, and here is my colleague.

Matti Elonem, CFO, Telenom: Hello, everybody. My name is Matti Elonem. I’m CFO of Huftalan.

Ottebecka Huftalan, CEO, Telenom: And shortly, I will go through our content today. I will go through review period and strategic progress and also software business. And after that, Matti will continue with financial development and outlook and guidance. So thank you. Let’s go.

Some highlights from q two. Comparable net sales increase driven by Finland and Spain. Second one, we also launched our new brand for our software business, which calls today Yasar. And we ended our piloting of software sales in Finland for external accounting firms and their clients, and, this pilot went successfully. Third highlights is that customer base growth continued at 4.7% annually.

From financial point of view, these highlights, as I told, how comparable net sales increased driven by Finland and Spain, it increased 3.1%. And EBITDA growth came from Spain while Finland has been remained at the comparison periods level. So EBITDA was 1.2% over last year compared to last year, and it was close to €10,000,000. And right hand side, you can see that our accounting business revenue is around 30,000,000, was around 30,000,000, and software business was around 5,000,000 in q two. And now we will go to the strategy progress.

Everything started start from our target, and it is growth. And, Tynon will focus on our core competencies, which what we have developed many decades, like accounting businesses. We have been there over five decades, and we have developed our own software over two decades. And now we have these two pillars, and we will grow with those. And by that way, we believe that we can, like, have more scalable growth potential than before.

Some market trends which are accelerating growth. First is the legislation, and the most important is that these trends are driving digitalization. For example, e invoicing, it will be mandatory in, for example, in in Spain near future. Second one is customer behavior is changing to our digital platform. We have also experience of that.

We have sold our services more and more via digital way. Third one is digitalization is happening now, particularly in Spain and in Italy. And, I will tell more about that later. By this slide, we will open more about, like, history and our proven strategy and strong historical track record. So we can see that our high investment pace is over, and our, fruits is going to be collects near near future.

There’s four phases. The first one is that when we developed our digital capabilities and platform in Finland. And the second one, sixteen to 20, you can see that when digital transformation impact on profitability in Finland. So our comparable EBIT, like, increased third time, fourth time, what is was before that phase when we implemented all our digital features in place in Finland. And third phase is here that we strongly invest invested in internationalization and and software.

Of course, we have, like, built our organize organization in in Sweden, Spain, and Italy. And we have also localized our software in Sweden and now it in use there. So for example, in last five year, our software investment cost has been over €60,000,000, and we have also acquired over 30 close to €40,000,000 in in other countries than in Finland to acquire new businesses. And now it looks like that our software investments is decreasing as as we have told before. And this four phase is that replicating a proven strategy and concept in international markets.

So we have good capabilities for profitable growth created in Sweden, and Matt will open more about later of that by figure. We are well positioned in Spain to benefit from the invoicing reform. And now we are more focused company. We are focusing on only for our core businesses. We don’t have any more, like, new business areas.

And the fourth one is is the software business becomes the second pillar alongside the service business, and it will be the scalable one also. Here’s three strategic priorities for this year. First one is improving profitability in Sweden. Second, leveraging the entry into force of the Spanish e invoicing direct team. And the third one is building sales channels and developing SaaS capabilities in the software business.

What we have done in Sweden, we systematically implemented one Telenom operating methods and process as well as our proprietary software. We also invested in turning net sales on the growth track. And third one, we estimate that profitability will improve from the comparison barrier towards the end of the year. Matti will open later of of figure, but now we are seeing that we are now in the same profitable level, and turnaround is ongoing well. Second, strategic progress capitalizing on the entry in the force of the Spanish e invoicing directive.

So the it’s good to know that officer has decided in in Spain that businesses who are sending invoices, they have to use stamp software. This kind of software, what officer has accepted. And when they are invoicing in the first of January, they have to use one of those listed software. And we have built these capabilities to our own software that we can, like, respond to market change. And we also continue to roll out our proprietary software to our customers to facilitate their business and prepare them for the invoicing transition.

So we we are well positioned in in Spain, and this looks like very good just now. When we compare this situation, what we have seen ten, fifteen years ago in Finland, so it looks like very good. Okay. How about software businesses? Sales channels, We hire business leads appointed in Spain and Sweden.

And Telenos Software brand loans, as I told, Telenos Software social feel operate under the EASUR brand from now on. And EASER means easy adviser. So we think about so that by using EASER, you can easily find good adviser, and it helps your manage your businesses because it’s so easy to use for, I mean, for entrepreneurs. And, of course, for Akkadant, it’s so easy to use. Okay.

Piloting of software sales in Finland to external accounting firms and their clients was also successful. And now I will open more about, software business, what is what it is really. Okay. So we approach so that we have, like, two interfaces. The left side hand, you can see Azure app, which is dedicate dedicated interface for the entrepreneurs.

And in the right hand side, you can see the ASR accounting, which has developed for professional for accountants. And by dividing these two interfaces, of course, they have the same, database, but two different interfaces, we can really differentiate from the other competitor softwares by offering easier tools to use for for enterprise and enterprises. And for accountant, we can offer the good process and and software, which is very, very high automated. And by that way, they can, like, save time and make more more profitable. Some figures.

Okay. Today, we have over 12 thousands small and medium enterprises clients. Our annual recurring revenue is over €20,000,000. This comes mostly from the Finland, maybe 99% of that. And we have over 60 thousands end users, over 9,500,000 transactions annually.

I mean, sales and purchase invoices. We have, like, in four countries, 140 full time employees. Logins per month over 200 thousands. And today, we have over 60 partner offices in Finland already. And just remind that we started to sell our software for other accounting offices.

We we we call those offices partner offices in the beginning of that this year. So we we really see that this has successful well well. And some development in the number of customers. If I go through these lines, the first line there is the SaaS charge separately. These clients comes from the mostly from the Finland, and this means that EASER directly invoice sees end customers for software.

So EASER don’t invoice Telenum and Telenum invoice and don’t invoice software to the end clients. So the both businesses, will invoice their own clients, and and Telenum accounting business will invoice their own clients. Second row is SaaS not charged separately. These are the clients who are using our software, and these are from Sweden and and Spain, software fees are not yet charged separately and are partly included in the service prices. And during next fall, we are going to make decision via that how do we going to start charging those clients.

But it’s good to know that we estimate that the average revenue per customers in Spain and Sweden is around half or less compared to the price level in Finland. And third row is that potential customers for software as a service. So these kind of clients who are only service clients, This comes also from Sweden and Spain. There is a large number of customers who are not yet using the software. And, of course, now we are hiring new accounting offices, and they are they have started to sell for their own clients.

So those clients will come over that figures when when they really succeed selling their services and that I know as our software for end clients. So but we see that there is the big potential of of of this conversation in in current businesses. But in the long term, of course, the bigger part of the growth will come from the other clients than Telenom service clients. Okay. This was my my stay.

And now, Matt, go ahead, please.

Matti Elonem, CFO, Telenom: Right. Hello, and welcome to follow this half year reporting review from my behalf also. Let’s start with the net sales. Net sales grew by 3%, a little bit more than 3%, ending up to almost 35,000,000. And it was driven by the successful, customer acquisitions.

We were able to get new customers in, Finland and in Spain. We also made one small acquisition at the beginning of the second quarter, which boosted up, the the net sales growth a little bit. On the other hand, development in Sweden, it slowed down our growth and because the net sales remained below the comparison peer period in Sweden. Then profitability. Profitability slightly in increased.

The EBITDA on the second quarter was almost 10,000,000, and the relative profitability was 28%. And this time, the profitability or or the EBITDA gain, came from Spain, while Finland and Sweden remained on the same level as last year. EBIT level went down a little bit by 300,000, ending up to 10%, little bit more than 10%, and it was obviously because of increased depreciation level. In the past, we have experienced quite long and high investment level. And right now, at the development side, we are in the phase that we we can lower down our investment significantly.

So on the last quarter, our own software investments decreased by 1,200,000.0. And for the full half year, it was decreased by 1,900,000.0. That, of course, immediately improves the cash flow, but it will also have the impact to the future depreciation level. Then country specific numbers. Finland net sales increased by 4.6%, ending up to 23,500,000.0.

And in Finland, the market situation is getting more steady. We learned that the Telenom customers’ transaction volumes, decreased. It has stopped now. It’s not yet increasing, but at least it has stopped. And because we are able to get new customers all the time, then we can turn this to, net sales to growth.

Finland EBITDA level pretty much was on the on the same same level. If we look at the absolute numbers, little bit less than 9,000,000. The relative profitability measured by EBITDA decreased a a little bit. In Finland, we are, seeking for the growth in the future as well. And for this quarter, the EBITDA remained at the same level because of the growth cost.

And but we are not so worried about that the development in Finland that that it will stay the same level or that it will decrease. We look to the future that that we still have room for more efficient processes and more profitable slightly in Finland in the future. The net sales in Sweden, it decreased by nine and a half percent ending up to 6,500,000.0, and that’s mainly because of the customer churn in, in 02/2024. Lately, we have seen that the trend is turning to better in, getting new customers and and churn. So we, estimate that this decrease will slow down towards the end of the year.

But 2025 is going to be significantly lower than ’24 measured by net sales. EBITDA level on the last quarter in Sweden, it was pretty much on the same same level. And and even the the the net sales decreased, we were able to scale down our costs at the same time, but we were we didn’t want to do it too too strongly because we want to secure our growth possibilities in future as well. And Spain. Spain grew by 18%, ending up to 4,700,000.0.

The organic growth and the sales is working really well in in Spain, and it’s, starting to come come through. Also, we made the small acquisition at the beginning of the period, which boosted up the the growth. We believe that the organic growth, we have good possibilities to grow in in Spain because the the nets the the sales is working well, and also the mandatory e invoice directive is going to be placed in in Spain, and we have good possibilities to offer services for that both in software and accounting services. EBITDA in Spain also grew by 300,000, ended up to 14% on the relative EBITDA. And and we were able to bring more volume to the to the business, and that, came through as a better profitability.

We will focus in the future to improve the profitability by streamlining our processes. There is multiple things that we can do better, and we believe that there is a lot of room to to to make it more smoothly and to increase the profitability in the future as well. Also, that we acquire recurring and profitable customers in the future. Then a little bit about the business areas. The accounting business was a little bit less than 30,000,000, and the second quarter is seasonal EBITDA.

The best quarter of the accounting business and the software business was 5,300,000.0, and there is not that much seasonality in the in the software business. That’s our estimation. Accounting business, EBITDA was, a little bit more than 20% ending up to 6,100,000.0, and the software business, was 3.6, and the relative profitability was almost 70%. And last, the the guidance. We remain our, with our guidance at the same level.

We are expecting to have net sales between 130, 140,000,000, and EBITDA around 36 to 42,000,000. Thank you. And let’s have a look if we have any questions. Okay. Anton is asking about, will software invest investments decrease more than q two level?

If yes, by how much? Well, we saw that, on the first quarter, the investments, on the software was around 800, and now it was 1,200,000.0. It might decrease a little bit, but I I think that the the biggest decreases is has already happened, and it will be more mildly in in future. But it might be a little bit more in the future.

Ottebecka Huftalan, CEO, Telenom: And, totally, it’s between 3 to €4,000,000. In the year. Yep. Yeah. It will decrease that.

Matti Elonem, CFO, Telenom: Yep. Yep. Yeah. Yes.

Ottebecka Huftalan, CEO, Telenom: Okay. Is there any other Emil Immonen, do you want to ask anything?

Emil Immonen, Analyst: Can you hear me?

Matti Elonem, CFO, Telenom: Yes. Yes. Can.

Emil Immonen, Analyst: Yes. Great. Thanks for thanks for taking my questions. Just a couple ones. First, on your operating costs.

Are you doing any cost cutting now for h two?

Matti Elonem, CFO, Telenom: Well, not really any specific, not not more than usual. Of course, we are quite careful with our our costs and and so on, but we also want to maintain our future growth possibilities. But nothing really specific cost cost cutting. Of course, in Sweden, when the the, net sales is decreasing, we need to follow the the net sales with the cost as well.

Ottebecka Huftalan, CEO, Telenom: And, maybe, I would add that we believe also that we can get better profitability in q three in Finland than it was q two. I’m I’m in the comparable. Back on track again.

Emil Immonen, Analyst: Then to maybe continue on that, do you expect that if you only reach the lower end of your sales guidance, can you then reach your EBITDA guidance?

Matti Elonem, CFO, Telenom: Well, at this stage, we don’t want to comment too much on on guidance. We we remain at the at the same level. We think that we have good possibilities to increase our profitability on the second half. And and, of course, we we try to follow the the cost which so that it’s in line with the net sales as well.

Emil Immonen, Analyst: Okay. Then that’s clear. What about the top end of guidance? Is it possible to reach that in any way, or what needs to happen?

Matti Elonem, CFO, Telenom: Well, it’s now 130 to 140. And as you all all know, we we might do some acquisitions in in Spain. And if it happens soon, we would still want to, keep the room room for it. If it doesn’t if it doesn’t happen, quite soon or at all this year for some reason, then, of course, it is closer to 130 rather than 140. But we want to make make the room there as well that because you never know about the acquisitions if they’re going to happen or not.

There might be some minor thing that will will stop the acquisition or push it forward.

Emil Immonen, Analyst: Mhmm. Okay. I understand. How about your balance sheet? Do you feel that you have the capacity to do more MSA?

I mean, your net debt starts to be quite high. So where’s the covenant level and and your confidence on that?

Matti Elonem, CFO, Telenom: Yeah. We are quite con confident with with the covenant levels and and all also that we renewed our contract in in all where we have a big site, and that increased our debt by 3 and a half million, because the IFRS 16, standard, and that press it down a little bit the the equity level and and increase the net debt. But right now, we are okay with the covenants, and and we think that we have possibilities to make the acquisitions as well in in the second half.

Emil Immonen, Analyst: Okay. Thank you so much.

Ottebecka Huftalan, CEO, Telenom: Okay. Thank you very much. If I shortly summarize because there is no more questions. So we our net sales increased, and we are in well position in in Spain because of the e invoice directive will be implemented soon. And we also see turnaround in Sweden.

So it looks like great in in future, so it is right time to take the next step to the continue our vacation. So have a nice summer, everybody.

Matti Elonem, CFO, Telenom: Bye bye. Thank you.

Ottebecka Huftalan, CEO, Telenom: Bye bye.

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