Good day, and thank you for standing by. Welcome to the Columbus Interim Report Q2 2025 Webcast And Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Alternatively, you may submit your questions via the webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Søren Krogh Knudsen. Please go ahead.
Thank you very much, operator, and welcome to all of you for today's webcast where we will be diving into our financial results for Q2 of 2025 and also having a look at the combined first half year. My name is Søren Krogh Knudsen, as the operator just said. I am the CEO of Columbus, and with me is Brian Iversen, our Group CFO, who will help me present. I will start with just a brief overview of the financial highlights. I will follow up with some observations on market and operational highlights. Brian will take over with a run-through of the financials in a bit more detail and then go into the guidance section, and we'll finish on a Q&A session. The revenue for Q2 in 2025 actually ended with a slight decline.
We're still seeing some of these challenging conditions, particularly in the Nordic markets, whereas our U.K. and U.S. actually continued the positive trend that we've also reported on in previous sessions. It should be noted that there were actually two fewer working days in Q2 of 2025 compared to 2024, and that obviously impacts the comparison negatively. Our EBITDA declined by 27% when adjusted for the extraordinary income we had in Q2 of 2024. Overall, this is mainly a result of a weaker top line and also a slightly weaker efficiency in Q2 of 2025. The contribution margin, and the contribution margin is higher up in the result calculation, so basically, looking at the contract profitability, increased with one percentage point to 19% in Q2 of 2025 compared to 18% in Q2 of 2024.
This is primarily due to further improved project execution, something that we've been working on for, I would say, for the past four years. We continue that positive development. Brian will cover in his section how each individual business unit has performed on that. The cash flow from operations increased by 13% from $16 million for the same quarter last year to $18 million in Q2 of 2025. We think this again underpins the soundness of the business and that we have a very close relationship with our customers, which we are particularly pleased with in a period like this where we're seeing a little bit more sort of turmoil on the global markets. Last point here, comments on our two business units. The runner-up business unit, the second largest and the third largest.
We've reported to you in previous sessions that both of these units have gone under different types of restructuring and development over the past years. This is really working for us. Compared to the same quarter last year, our M3 unit is up 13% in terms of efficiency. Our ability to sell the hours basically that are available to us, so 13% is a very big increase up to 68% now. Digital Commerce is up 10 percentage points to 63% in June compared to June 2024. These two units have some significant improvements, which you will also be able to see when Brian comments further on the development there. Let's go to the market and operational highlights. Just to comment on what is on my radar and the rest of the Group Management Team, the first point is called scaling our organization.
These quarters are very challenging as we see shifts in the market that are not uniform across the business. Some geographies are fairly unaffected by geopolitical statements. Some are very affected for a short term. Some business lines thrive and some less so. Like we've done with our M3 and the Digital Commerce department in previous years, we are very, very keen on pinpoint structure improvements where we're not just painting across all geographies or all business units. We're really assessing each business unit on each geographical level and making necessary adjustments either in capacity or we're changing the customer focus. We might change some of the profiles that we're hiring. Despite that our team size has gone down somewhat, it's not because we're not hiring. It's actually because we are changing the skill set of the organization to suit future needs. This is a very important task.
As I say, it's not something which can just be done with a simple strategic decision which will then be carried out in each country and in each business line. It really needs to be bespoke for each of them. A comment on AI. Things are developing very fast and we have very interesting projects. We continue to showcase the possibilities. We're running internal programs for further proficiency development, our own staff. We are testing various tools internally as well. It means a lot for our own efficiency. Perhaps the most important one to bring forward is that we're seeing now a very clear strategy from Microsoft on how they envisage the market developing for what we would call, I would call it, the simpler end of the capability of the technology.
It's really about how to completely automate simpler and more repetitive work tasks, very similar to what we've talked about for years with just process automation, but with much more contextual understanding. We have a big role to play there. There's a huge transformation, which is a non-technology transformation for all our customers in adopting this technology and basically changing their human side of the organization to embrace this. This is something we are spending a lot of time on developing our service offering for. Finally, we've taken the opportunity after we closed down the strategic review to take all the learnings we had from that. We had, as you know, a multitude of dialogues with industry players, financial players, and that gave us some inspiration. We are giving currently our strategy a midway health check.
We are approximately halfway into our health check, particularly with a focus on the top point of the slides, you know how to scale the organization. We've also been doing some further development on our Evolve offering. That's the part which is a recurring revenue and which basically in periods where we're not doing any major projects for our major customers, this is how we work with them. This is also usually how we secure the next bigger arrangement. We want to change some things there and put more emphasis on getting more of this, so more recurring revenue in the future. As I said, also lots of development in data and AI, and also a lot of attention is currently being given to updating our understanding of the M&A landscape and the opportunities there.
We are still in a situation where we consider the debt level of the company low. We consider the operational cash flow as strong, and our ability to obtain further funding is also strong. We are seeing some indications that the price point of targets in the market is starting to come down to acceptable levels. We might pursue some opportunities there. That concludes that. I'll hand over to you, Brian, for the financials. We shift to slide the service revenue for Q2 2025.
Thank you. Thank you, Søren. As always, let me start with the service revenue for Q2 business line. As Søren mentioned, we saw an overall decline in the quarter of 4%, and that is only driven by our biggest business line, Dynamics, which saw a decline of 9%. Remember, Dynamics accounts for around 65% of our total revenue. Therefore, it had a significant impact on the group when they see a decline. On the other side, M3 and Digital Commerce both saw an increase in revenue compared with the same quarter last year. That is actually the first time in six months or in two quarters that we see that they are returning back to growth, as Søren mentioned, after some kind of restructuring and a shift in major projects and starting up new projects. This is a very positive sign in a challenging business environment that we see here.
That is super. Data and AI had a flat development in the quarter. If we move to the next slide and our contribution margin, which is the lowest, let's say, profitability KPI for our business lines, we can see that Dynamics saw a decline of 2 percentage points during the quarter. Again, if you have a lower revenue, we did see a lower efficiency, which again means you don't get our good resources out working on contracts. That impacts, of course, the business line contribution. On the other hand, and it goes well in hand with the organic growth that we saw in both M3 and Digital Commerce, we saw a strong uplift in contribution margin, M3 from 14% to 21% in the quarter, and Digital Commerce from minus 4% to 12%.
You might remember that Digital Commerce went through quite a serious turnaround during last year, and especially Q2 last year was a hard hit based on that restructuring. It's really good to see that M3 is now getting up in the 20s where they should be, and that is from hard work on strong delivery to also new clients out there. Data and AI saw a dip; it's minor numbers, so a small impact gives some high percentage points, dip 10 percentage points, mainly due to that they continuously invest in new resources on board that need some training and some setting up on new projects and that do have a short-term cost when you are growing in a good pace. Let's have a look at the service revenue per market unit or country for Q2. Sweden had a flat development compared to the same quarter last year.
It's still some headwind over there, but we managed to get them at least on par. That is an improvement compared to previous quarters where we have seen a decline, I believe over the last two or three quarters at least. Denmark and Norway have seen a decline in revenue, especially Denmark and Norway, where Dynamics is big, and it's one of the biggest players. They've had some headwind due to postponement and decision-making on new projects. As Dynamics is fairly big in both countries, it does have a negative impact on the country's organic growth development. The U.K. continues, although a bit lower percentages. Growth pattern, I believe the last years, we have seen strong growth from their side. It's 2% for the quarter, but we still see some very good perspective over there.
The U.S., although on a lower value, saw a steep increase, mainly from very strong projects or new projects in our M3 business lines where they start to get a very good and strong foothold. Good. Let's move to the page one of the first six months of 2025. A bit the same story. Dynamics for the first half year, a decline of 5%. As mentioned before, project hesitations and start hesitations from new projects are seen, especially in Norway and in Denmark, a bit in Sweden. M3, you will see a minus 4% decline in revenue for the first six months. As I just mentioned, Q2, we do start to see the turning point for M3 after some quarters with a shift in projects in this business line. Digital Commerce also saw a good Q2, but started the year a bit lower after the restructuring. Year-to-date, minus 4% growth.
Data and AI, opposite, they had a strong Q1, and therefore, they ended the first half year on plus 13%. On the contribution margin for page one of the first six months, overall, we have seen a 1 percentage point increase from 21% to 22% for the first half year. I'm certain that this is due to the proactive adjustments of our capacity, as Søren also mentioned before, and that is a continuous work. Secondly, strong project execution and therefore a strong and good project margin, which we have a high focus on. As you will see, if we look at each business line, Dynamics has seen a flat development for the first six months, 24% to 24%, whereas M3 have moved up, and especially in Q2, moved up to 23% contribution margin, close to Dynamics now.
Those of you who have followed it for years will know that M3 had been in the lower 20, upper things in the past years. I think this is a really strong development that we have seen in this business line. Digital Commerce is out of the tough times, starting to get up there, not at where we want it to be, the same with data and AI. There are smaller business lines, we did do some investments, and Digital Commerce has been through some restructuring where there was some slipover also in the beginning of this year. Overall, a very satisfied result on the contribution margin for the first half year. We are happy to see even in an environment that is a bit tough out there, we see an improvement in our basic business capability of returning revenue to an even better profitability.
Let me end this slideshow with the service revenue for the first half year for our market units. Again, a bit the same picture, headwind in Denmark and Norway, both down, especially impacted by the Dynamics project hesitations. U.K. and U.S. continue the upward trend. Not that it's not a tough market in the U.K. or in the U.S. for that sake, but we do see a good traction and some strong wins with our teams in these two countries. Especially the U.K. is starting to get up there together with Denmark's size. They have grown quite significantly in the past three years. That was all on the specific business line and markets. Let me finish off before questions with our outlook.
As we announced the 16th of July, and you might know, all of you, we adjusted our margins based on the current outlook and what we see in the market. We adjusted the full-year guidance for 2025 to a revenue of a level of around DKK 1.7 billion on par with 2024. Roughly a 0% growth. We have thereby also adjusted our EBITDA margin from previously 10% to 12% to now 7% to 9%. We came also away with the explanation and a small input on that in the 16th of July announcement. That was all for me for now. I'll hand over to the operator, and then it's open for questions.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. If you wish to ask a question via the webcast, please type it into the box and click submit. Please stand by while we compile the Q&A roster. Thank you. We will now take our first phone question. One moment, please. Your first question comes from the line of Yi Wei Xu from SEB. Please go ahead.
Hi. It's Wei from SEB. Thank you for taking my questions. I have a couple of questions, and I'll do one at a time. Firstly, we're looking at your Dynamics unit, and it's clearly a challenge situation. Can you confirm it is solely driven by a sort of macroeconomic uncertainty rather than the AI disruption or the customers' concern to use the U.S. technology?
Yes. Okay. Thank you for the question. I'll just summarize. It's particularly to Dynamics, a Microsoft platform, and whether the slowdown in growth and in some geographical markets, negative growth, is caused by anything else than the macro factors. That could be this digital sovereignty discussion and also, you say, an AI impact. Let me start with the easy thing. Digital sovereignty is something that we discussed both with Microsoft on how to better segregate the operational environments in the future. It's something that customers have an interest in, but it's not something that has an impact on their decision to engage with the Dynamics platform. To the second point, I think on the contrary, actually, the embedding of AI into a software suite like Dynamics as part of the Microsoft Biz Apps suite is very impressive and is probably more working to their advantage now.
It is mainly down to macroeconomics. However, I do also think that there's a fourth element here that could be our internal, we've grown a lot in Dynamics over the past years. Sometimes you plateau on growth. You need to reshuffle your leadership setup like we've done for Dynamics and M3. We've been working on that for a while, and we continue to go through some steps where I think we in Columbus can have a better approach to business development in the market. We're starting to see some of that come through. I think particularly the U.K. market, that perhaps goes without saying, is still strong. We're seeing a lower growth than we normally see, but it's still a very, very strong market for us.
The Danish market, which has had this stark change from growth to some negative growth, we still have a very, very high efficiency on the team. The profitability is there on the Danish team. Now we just need to look for these opportunities to start growing the team again. Swedish and Norwegian market are a little bit more tricky for us, and we're building that there. The work for us is more of really heavy pipeline building, and we've been in that process for a while due to the delays. I would like to perhaps say a word about everybody's talking about this dragged-out decision-making, prolonging hesitance in the market. What it actually means for us, two examples, one for existing customers and one for new. First for the existing, a big part of our business every year comes from existing customers.
They then communicate a desire to run a big project. That could be an acquisition that needs to be moved on to a core platform or something else. That's what we're used to, and we're still seeing that. However, it's very often when we're communicated a starting date of Q1, this is without competition that we are already in there. They're just saying, "Okay, get ready. We're going to deliver this. We're going to start in January." Nothing happens. They have to delay it. They have to discuss things in the board. However, what is good for us, it comes back to us six months after. It doesn't go away. It's not permanently shut down. Most of it comes back just up to at least a half year later than expected. We need a much bigger overbooking, if you will, of our resources.
The other one is for new customers where we typically go through a very rigid competition process against our competitors. We get narrowed down in the field of competitors. We enter into exclusive negotiations. We negotiate the contract, perhaps, and all of it. Suddenly, the whole thing is just put on a hold. They very often come back to us. We have a number of these things that then come back. At the moment, it's about closing that gap in the pipeline to be more overbooked. I hope that answers the first questions.
Yes, that was very clear. Can I follow up on also Dynamics? In Denmark, there was one of your peers talking about tougher competition from the international vendors to implement the Microsoft Dynamics for the enterprises. They were talking about it for two quarters. Are you seeing the same thing, or are you confident that you are still winning and have a good win rate?
Our win rate, actually, on the Dynamics side has actually gone slightly up in this environment, but there are just less decisions being taken. I do see some competitors. We've always seen a competitive landscape. I don't consider the competition to be worse or less than before. Clearly, some of the more, perhaps more distressed organizations will opt for some price decreases in this period of time, but it's not something that has really affected us. As Brian was just talking about the contribution margin, we stick to the guidelines we have and build these long-term relationships.
Okay. Great. Also, on the pipeline, how is current trading, if you can indicate a bit since now you have two months more visibility after closing of the Q2?
Sorry, can you just say that again?
Can you talk about the current trading since you have two months more visibility now after the closing of Q2?
Yeah.
Yes.
Okay. So you mean they lean on.
Yeah.
Okay.
To resume on anything?
Yeah. There's nothing which we can currently report on there. The quarter isn't closed, but also a month and a half of Q3 has now passed. Those are the summer months, and they're very hard for us to predict on. There's nothing that has led us to sort of report on extraordinary events.
Okay. Fair enough.
Yeah.
Yes. A question to Brian regarding the EBITDA margin guidance for this year, 7%- 9%. I realized that you had a sort of a non-recurring item in Q2. You also indicate that it could actually adjust the capacity. What I understand is that it could potentially be some sort of staff reduction. The 7%- 9%, is it after the non-recurring items, or is it before?
I mean, we are not one of the companies, as you know, Wei, that sort of born after stuff. Everything is included in the 7%- 9% EBITDA margin, also restructuring and so on. You're right. We actually had a negative. We actually had a cost of $2 million, extraordinary cost of $2 million. I decided not to take that out because it was minor. We eat that as well. Fair question, but it's all inclusive, so to speak, if you understand.
Should we expect any meaningful restructuring costs or service payments in the second half?
Okay. Brian, perhaps I can take that one because I will also just include the question from Michael Hoover here, who's asking us whether we, regardless of all the macro factors, if we will start to cut headcounts, which is also sort of pertaining to the same question. We will, and we are doing capacity adjustments to our organization. I would like to make it clear that it is not in any way a hiring freeze. It goes back to what I said before about bespoke plans for each geographical business unit. Some are hiring, like data and AI in Denmark is hiring very heavily at the moment. There are areas where we are adjusting some capacity. Also, on the overhead costs, we are trying to bring that more in line with the slower growth than what we saw. That's clear. There's an additional question here.
I assume that you continue to have the goals of 2026, the EBITDA 15%. At the moment, and we will report if we change anything, that remains our goal. Obviously, as you can see from the adjusted guidance in 2025, we would have liked to get to 10%- 12% already this year. We understand why we're not getting there, and it's efficiency and it's headcount. It's something we're fairly good at controlling. We think that the business model is really working. The contribution margin is there. The quality is there. The customer continuation is there. As we reported, there is hesitance in the market. The final question, can we expect that the share buyback will remain at the current level year out?
Yeah, I mean, we are under some strict rules around it. We cannot sort of guarantee or expect that, but we continue as planned and as we can. It's basically out of our hands. That's something we have outsourced to Nordea that is managing this part for us and we're not that involved with that.
Yeah. Let me try also, Brian. The way it works for us, we've set aside the amount communicated. That is the trading mandate that has been given as it should be under the rules. It is depending on how quickly we chew through that amount that's been set aside. All right. Thank you. I think that concludes, or that's all the time we have. Thank you for the great questions. Very exciting and challenging quarter for us. The strategy is definitely working. We're seeing the returns and focusing on the right customers, the right industries, the right solutions. The market is challenging. We look forward to report back to you at the end of Q3. Thank you. That concludes the call.
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