Welcome to today's event where we have the pleasure to present Columbus. Today's topic, of course, the financial results from Q1 2025, how the year has started, and how you see it going forward. As always, we are joined by CEO Søren Krogh Knudsen and CFO Brian Iversen. As always, there's a box down below to ask some questions during the event or after, but firstly, we will take the presentation, and then we will take the main part of the questions in the end. For now, I will hand the call over to you, Søren.
Thank you very much, Mikael[guess], and thank you for all that have joined the conference. Brian and I look forward to presenting our financial results from Q1 of this year for you. To start us off, I will just, if you can just switch to the disclaimer, I'll give you 10 seconds to go through the formalities. I will start by going through some financial highlights and followed up by some observations on what drives the market performance going forward. The revenue in Q1 2024 ended with a slight decline for us, and the main part causing this are some continued quite challenging conditions in the Nordic market, whereas the U.K. continues on a positive trend and is up 17% in the quarter. We'll come back to a little bit the outlook for the Nordics.
I think we have seen a turning point, and I'll come back to just commenting on how I see that play out. Our EBITDA increased by 32% when adjusted for the extraordinary gain of $20 million from the M3 CS legal case we had in Q1 last year. We think this confirms the robustness of our strategy and business model, and also the soundness of the EBITDA 15 plan that we presented prior, so we continue to work towards that goal. This means that our EBITDA margin for this quarter was 10.7%, and that's up from 7.9% in the same quarter last year, again, when adjusted for the extraordinary income associated with the M3 CS legal case. Our contribution, so direct business contribution, increased by 2 percentage points to 25% in Q1 compared to 23% in Q1 2024.
This is primarily due to our improved project execution and also, I would say, a strong cost discipline. I'll just come back to some of the components of that. This is the primary driver of our EBITDA 15 plan that you're seeing that gradually kicks in here. The cash flow from operations decreased by 27%. However, again, when we adjust for the extraordinary gain in Q1 last year, the cash flow actually improved from $3 million to $17 million quarter- over- quarter. Again, that underpins the soundness of the development of the business. Next slide, please. Yeah. If I just comment on the development of both the EBITDA improvements, but also the flashes to slightly negative top line.
Some of the things driving our both top line and profit would be the commercial conditions that we operate under, and that there's a price point on the hourly rate, which is developing positively and actually exactly in accordance with our expectations. That part is good. The next thing is the efficiency. To which extent are we able to take all the hours we have available to deploy towards customers and make them successful or deployable so that we are actually also generating revenue from it. That part is also developing positively. We started just a smidge slower than we would have preferred to, but we're seeing a very positive development on that. That leaves the third one, which is the headcount. How many consultants do we actually have available that drives the overall capacity that we have?
As you can see there on both the right side, especially on the lower one, we have dropped slightly in headcount over the past 12 months, but we do see now that we have reached the low point, and we are starting to put on additional headcount again. Here is actually the main decision criteria for Brian and me to look at is how fast do we want to do this. In a normal business environment, we could act pretty fast based on our stock of work and our pipeline. Based on, I would say, the current business conditions, the external factors, we are going forward at a slightly more cautious pace in terms of rehiring. We want to make absolutely sure that we stay on track with the EBITDA improvement program, and we prioritize that quite high.
Also, given that there is a little bit of a risk that we can see temporary setbacks again in the workload with all of the, well, basically the new stream that we see affecting our customers at the moment. That is the reality that we deal with. We are starting to add in all the successful business units. We have rebuilt, or we have maintained and continue to build out our pipeline. It is strong. We can hire additional headcount, but we need to be cautious. We do not get ahead of the curve to the same extent we would if we just saw a really sort of more. If the business outlook was very clear to us, I think now we are seeing a little bit more of a duality in many of the scenarios.
A final comment here on the lower left side, I will also comment on the strategic review. We are still in the process. We are still developing the options that have been presented to us. We will come back when there is something more specific for us to present on this point. I will come back to some of this under the Q&A sessions. Brian, I think we will take the details first .
Yes. Thank you, Søren. Let's move to the financials a bit more detailed, our three usual slides. Number one is the service revenue per business line. I actually just did the count. It's the first quarter in first of the last 14 quarters we saw a growth. This is the first one with a slight decline. That is, of course, not super, but there is also a tough environment out there. If we look at it per business line, Dynamics, like the group, ended with a - 2% in the quarter compared to last year, slight decline. M3 and Dynamics was mainly, or they mainly looked into a decline in our Norwegian and Danish market in the quarter. M3, decline of 9%.
To that story is that the same quarter last year was extremely good and strong due to some closures and final work in some major projects. They, as I have been talking about, have been in a shifting mode during the past quarters. We feel pretty confident that they slowly get back on a growth pattern the coming quarters as well. Digital commerce, a bit the same story. They have also been through a big restructuring and have main part of their business in Sweden and in the retail market, which is probably the heaviest headwind you can face in our region right now. Therefore, they ended with an 11% decline. Data and AI continue a strong growth pattern. We're happy to see that.
That is an extremely important business line, and we really are looking for more talented consultants in that business to sustain the growth going forward, as Søren also mentioned. Let's move to the contribution margin. Søren mentioned that earlier on, we saw a 2 percentage point increase. This is one of our absolutely key KPIs. Here we saw that Dynamics maintained a strong level of around 26%. Some of you might remember that last year there were a few percentage points higher, but they have been merged with CXE for the first time here in Q1, and that has dragged down a few percentage points on the margin when we look at it combined now. M3, flattish or 1 percentage point decrease.
Again, they had a really strong quarter last year in Q1, but it's definitely on the right level, and we feel confident that they will continue on that solid and important high level. Digital commerce, flat development, 11%. It's improving compared to the last three quarters, but not compared to Q1 last year. Here again, we feel confident that they slowly get back on track after a major restructuring and adjustment of the organizational setup. Data AI, they had a bad quarter last year, so let's not talk too much about that. They should be in the around 20s, and that is also a strong level for a strategic business line that often will have higher growth and new consultants that do impact a bit on the profitability during such a steep growth. Good. Let's move to my last slide, service revenue per market unit.
I almost said Sweden is down 11%. They still see some tough environment up there, ending up in a bit longer decision period of new projects and start of these. When I talk to people, it's not like we are losing projects based on that, but it's really just a slower pace that we are moving at, and that does still have slight negative impact on our top line. Denmark, for the first time in many quarters, a slight decrease of 6%. It's primarily our Dynamics business that saw a slight reduction in activity in the quarter. Again, here we feel fairly confident that we slowly will get back under the growth track again. The U.K. continues to be a strong growth market with some good wins, and they're slowly taking the, after taking over Norway as our third biggest country, they really continue a strong growth there.
Norway is also a bit dull, so to speak. Dynamics is again seeing some heavy headwinds and some geopolitical tensions still impact some of the major decision points up there. U.S., it's a smaller number, but we feel like we have seen the bottom the past quarters and start to see a slight growth now, or not slight, 50%, still on a small amount. We are happy to see that we have made some changes in organization over there and start to see some positive outcome of that. Good. That's all on this. Let's move to the outlook slide. As we announced the 17th of January, we expect organic growth of around 7%-9%. I think it's important here to say that we, of course, follow that very closely.
It's a tough market out there, but we still do see some very positive trends and projects coming in. Søren mentioned primarily in M3 and some also in Dynamics do see some strong activity, and we expect these to kick in over the coming quarters. EBITDA margin, 10%-12%. Here we also feel confident that we are on that right track. That is our EBITDA 15 plan, and a key point is here, of course, to improve our contribution, our contribution margin, as we spoke about. So here we also maintain. So we maintain both of our points. Good. Then we move to questions.
Perfect. Let's jump into them. When you are in a process of looking at the strategic possibilities, have you seen any large amount of employees leaving you? How about applicants? Are you able to get the people? It looks like you want to scale a little bit up. The first question here around the strategic process, whether that is impacting your ability to keep employees or maybe even growing them when you need to do that going ahead in the coming quarters.
Yeah. A very important question and something we are actually doing our very best also to handle to take some of the anxiety out of an exercise like this that can be there for the employees. I can say we're not seeing any increased attrition of employees in general at all. We work with, we are limited in terms of how much information we can give, but we try to keep them as up to date as we possibly can. When it comes to new hires, I would say I would split that one in two. When it comes to functional employees, consultants, it's not causing any delays at all or hampering our abilities to attract talent.
On the contrary, some of the more senior positions, when we recruit for them, there's definitely an additional part of that conversation where they're very interested in, well, what could the future be once I've joined? Again, we have to be very diligent in not neglecting this and saying, well, it will be what it will be. We need to really try to explore options with them. On that one, I think it's fair. There could possibly be somebody saying, call me once this is concluded. I would like to see it before I make up my mind. In fairness, there might be a few here that have delayed our process a little bit. That's that.
To the strategic process in general, how the investigation is going, there's a question, how is the uncertainty in the financial market changed anything in the strategic process? Anything of your thinking, whether the turmoil you're seeing out there, uncertainty? There's a question regarding the timeline. Is it correctly understood that you should expect that in Q3? Firstly, how much you can comment on the strategic process? A little bit on, is there something changing out there by the uncertainty, the financial turmoil? Thirdly, a very hard question on the timeline, whether you can give that or not.
Yeah. Okay. Yeah. So I think does the current turmoil have an effect? I think we have to say yes, definitely does. To which extent, I can't really go into numbers here, but it does have an effect. It does cause uncertainty in the market, both in terms of the ability to finance and things associated with that, but also things that are associated with future demand, which are harder to predict. However, when we go through a review like this, I think in most scenarios, it's expected that we would only end up with one at the end. That's not to say that there are still interested parties to talk to, but I think it's fair to say that the overall impact on an exercise like this is negative.
Yeah. And then a little bit on the timeline, whether you are able to comment on that or not.
I'm not able to comment on the timeline. I'll go back to what I've said previously. From an executive team point of view, or from my point of view, I have an interest in conducting this exercise as quickly as absolutely possible, but still heeding that we have to do this very well. We have to do it very correctly. We have to look at all things available to us. I don't think it's beneficial for any company to be in a review longer than necessary. We are pushing towards finalizing, whatever that then may be. Speed is a separate priority for us. We will push that as fast as we can.
Last question. How much visibility do we have in your backlog and pipeline concerning your organic growth guidance range of 7%-9%? You alluded a little bit to it, so it's to get a feel of it. I know you can't quantify it. How much is auto backlog and how much is pipeline? I know you can always add some percentage probability to a pipeline, but of course, it's more uncertain in uncertain time. A little bit about how much visibility you have and maybe a little bit about comments on how much is backlog and how much is pipeline that you expect this turnaround in the growth from Q1 to reach your guidance.
Yeah. Okay. Very good. Just an overall answer first. We have a pretty, I would say, pretty decent transparency of our pipeline, which is not so unlike what we would have under more normal circumstances. If we look at how we gauge the velocity of our business going forward, it is primarily based on three things. The most accurate one we can have, which tells us something about business performance in sort of the four- to eight-week outlook, is just looking at our efficiency, our current efficiency. Because when you have the size that we have and we are spread across a number of geographies, we are spread across a number of projects and customers, we never see very rapid developments either up or down on this one because it is spread across so many things. It is always a very slow-moving development.
We know that we have now a decent efficiency level to work from, as I commented on before. The next thing that can have an impact is just to look again at the stock of work. Is there anything which is about to expire sort of in the near future that could have an impact? We have a full understanding of that, of course. It is technically possible to have abrupt changes on them, but we very rarely see that. The longer outlook, which is sort of extending 10 weeks and then beyond that, is the pipeline where we also see a, I would say, I do think we see a decent pipeline. We have also closed contracts already where we're just not fully up to speed yet. They are not yet revenue-generating to the extent we're expecting them to when we're fully up to speed.
The tricky part here in terms of the 7%-9%, which I also tried explaining before, is our confidence in all of those numbers to now start hiring because we do need to increase headcount again. We are going to increase headcount, but how fast are we willing to move forward. There is an inherent risk in that. It takes us time to bring them on board. It takes a little time to bring them up to productivity level. If we then see a sudden downturn again, that is a risk. On the other hand, if we are now going into plain sailing, that would be nice, but perhaps not quite expected yet. We would be lacking those people very fast. I think there was another question. What do we prioritize more? The growth on the top line or the continuous EBITDA performance?
We do prioritize both, but not equally so. I think we have an extra eye on our EBITDA margin at the moment. Also just because it's prudent, because I would like to supercharge the top line growth, but I need something predictable to play against. At the moment, I think it's a little bit too unpredictable what I have to invest in. It's not that we don't prioritize the growth, but if I was to choose, I would say it's a 70/30 to the advantage of the EBITDA or something like that.
Yeah. Perfect. And then there's a little bit of a question around also that there's a question, and I think maybe you already answered it. Looking at your 2026 goals, and the question here is you are focusing more on the EBITDA, that's what you can control internally. But there's also a question here. Has the business condition changed since you gave your 2026 goals? I think it was the end of 2023 or mid-autumn, fall, sorry, 2023. So a lot has happened since that. So your feeling of the business climate that when you gave those targets until now.
Yeah. Correct. We did give those targets or the business climate that sort of defined our strategy was back in Q4 of 2023. The conditions have obviously changed, but it's worth noting that if you remember, Q4 2023 was not all blue sky either. That was post-Ukraine-Russia. That was inflation-driven, much worse, I believe, than now. Trying to remember exactly where we were. I think the interest rates were up already back then. You will remember better than me, Mikael, you trust these things. It wasn't a plane sailing business environment at all. What did it mean for us? It meant that we already expected the growth rate of the market to be quite heavily reduced. We had that in our strategy. I would say we had most of it in our strategy. Many things have changed.
The overall market growth, which is really what we have to consider, because we have a history of beating the market growth by approximately double up in the quarters over the last couple of years. We did know that that market growth was going to be quite heavily reduced. I think that's sort of where it's been. Part of it, we expected the trade tariffs and all of these things. I did not expect to this.
You did that, so I would have liked to know.
Yeah.
Did you have any comment, Brian? I saw you were.
No, no . It's probably fair to say the headwind has been a bit harder than expected at that time. On the other hand, I still think we believe in our goals, and that's what we fight for. If we look at some of our good colleagues out there, I also still believe that we are beating somehow the market, however you do it. I think it's a fair comment, but we try not to use it as a nice excuse internally, at least.
I guess going back to when you announced the targets, a lot of that was internally driven. It was efficiency measures. It was prices. Maybe also commenting a little bit about that in this quarter because the margin looks pretty healthy. Efficiency is the same. The people you send out to how many people you have out there, but still margins are going up without efficiency going up. Contribution margin is going up. Can you kind of allude on that? Is that cost consciousness in the rest of the organization? Is that better prices coming from what you also were targeting to maybe move to a little bit of the better and higher margin projects as such? A little bit comment on efficiency not moving, but actually you moving on margins, at least when you exclude the legal case from last year.
Yeah. There are a number of factors. I think the hourly rates we're able to achieve because we work for the right size customers in the right sectors is definitely a driving factor. I think also the quality of work, which means that we have no issues with guarantees or anything like that, is a major component. I think subcontractors is a separate topic, which we've worked with a lot over the past couple of years. Sometimes we will use subcontractors for specialist reasons or peak demands or something like that, but I don't think it had been well enough managed in the past. Subcontractors specifically have given us more of a—we're very wary of having sort of pass-through revenue, which contributes negatively. We're able to see the subcontractors we have now contribute to our EBITDA 15 plan.
I would say, as a specific comment too, that you said we had the same efficiency as last year. Now it becomes a little bit technical, but I'll try. That's true. We have the same efficiency. Two things come into play here. The first one is that the redundancies that we made and we already told about previously, we're still carrying some of those costs on the books in Q1 this year. As long as we carry them, the costs, we also let it show in the efficiency because that's the only way of looking at it. If you've paid for something, you might not be able to deploy it anymore, but we still look at it as part of our efficiency because otherwise we cheat ourselves. That's one part of it.
The other part of it is, and this is where it becomes technical. We also, as part of that exercise, went through some of our managerial resources or support resources. We thought we're working so closely with customers that they should also have an efficiency target. We've done this successfully before, so now we did it again. We took a number of people and say, "Okay, you don't have an efficiency target right now. You're not direct customer facing, but you should be." Then we add a target to them. When we do that, immediately our efficiency actually drops on the other side. We don't have a higher cost, but we make those hours available for selling. If they're not sold from day one, which they're not, the efficiency will go down a little bit until we convert that into true revenue. We're giving ourselves a little bit of a larger engine to work with. That affects it too.
Makes sense. It's a reallocation. Yeah.
Yeah. We decided not to bring that into, let's say, the report because some others put some special items line. We prefer not to use that one. I can see there is a single question regarding if people have been laid off, if they're not just continuing working. That would also be my take, of course, but it's not always, unfortunately, how it works. There are also different laws in Sweden, Norway, Denmark. Often we see when people are made redundant, it's rarely that they contribute the last two or three months to the business for different reasons. It is a bit expensive to move downwards the ladder, so to speak.
Check. There is a little bit of more detailed questions on the growth here in Q1 2025. How much is this geopolitical, meaning clients may be having a little bit of prolonged process? How much is it how much you bill customers? Is there an effect of the firings you did or the personnel reductions you did, that you actually cannot go out and bill those, maybe with a low efficiency, but at least you would have been able to bill them for some work done? It is a little bit of a question whether what is impacting the growth here the most.
Yeah. Okay. I think the first thing Brian and I have to say is we rarely prefer to blame external circumstances for our results because it just does not lead to anything good. We take responsibility for the results as they are. Could we have had a higher top line growth under the given circumstances? I believe we could, but not while still developing so positively on the EBITDA margin. It would have been that we have slowed down the intake of employees. We have firmed up our approach to subcontractors, as I said before, and that is sometimes at the expense of revenue. Imagine we have taken in a number of great consultants that that would have been possible.
Now we could have sold some of them some of the time, and that would always have given us a top line contribution, but it would probably have pulled us back in the short term on the EBITDA margin. I also have to say I believe in sort of recognizing sort of the period we are in. There is an advantage to saying, "Okay, now business conditions are tough a little bit on the outside, so let's do a major push on the EBITDA 15." As soon as we see a shift, we do a major push on the revenue. I think there's a little bit of I have 150 managers throughout Columbus, and if I send, "Yeah, a little bit of both, a little bit of both would be nice." That's not a clear signal from us as an executive team.
I'm trying to be as clear as I can. At the moment, we have asked them to be a little bit cautious, and that has an effect on the revenue side. Another way of looking at it would just be to say, "Do we know of customers that have been negatively affected by the tariffs, which is much more sort of practical?" We do. I mean, there are U.S. customers of ours that have big exports to Canada. There are some here in Europe that may not be super hard hit now, but unless something is resolved, they think they could take some kind of a hit, and they've slowed down their investments somewhat. We do see some specific examples from time to time.
Perfect. What is your exposure to the public sector? I guess the Danish growth, if you heard a little bit from your competitors, it looked like the public was better than the private. How are you exposed actually in your business? I think to recall reminding when we have discussed this that you are much more private than public. Is that correctly understood?
That is 100% correct. We do have some very few public sector customers, especially some in Sweden. I'm going to go out on a limb here. We do not even measure it. I think it is less than 5% of revenue, less than 2% of revenue. We are a private sector company. I can see there was a follow-up question, Mikael.
Yeah. This, that the 62% efficiency or billing, does that mean you have decided to say no to orders because of too low profitability?
Yeah. I understand the question, and it makes us sound like we're crazy if we only have 62% out there. But I actually have to answer yes. We still say no. We're not panicking. If we just go out there and lower prices, we're ruining the price points for all eternity. We continue more or less the path that we were on. Of course, we might be in some business unit in some country where we are significantly lower than 62%. We would be willing to perhaps contemplate a deal. We would not under normal circumstances. I don't think the correct response to this for us would be to just lower the prices, lower the prices. That's not a strategy.
Perfect. [Foreign language] It wasn't a question. It was, I think, a nod to your strategy. Lastly, a question from me, or from me, the Dynamics, or sorry, the ERP systems. We have talked about this. That is a good area right now, and it was a good area with higher growth because of all the supply chain issues. I guess this hasn't lessened less. I think a company now needs to know where it produces everything, where it sells everything. Any thoughts about that? I think in Microsoft, you saw a small slowdown in their numbers in the Dynamics 365 business, but actually still pretty strong growth. Any thoughts about your main area, the ERP system going forward?
Yes. I think, Mikael, maybe we should make a note, and I would like to bring a few slides next time. Let me just try to do a very quick—I just came back this Saturday from spending a week in the U.S. last week with some of our major software partners. Two things. We believe as a company in Columbus and our suppliers as well on being very sector-specific. The service we provide, the software we provide has to be highly customized for the industry verticals that we work with, which is also why we do not do public finance and all of it. We have chosen some that we are really good at. That has been sort of the winning formula for us in the past five years.
Now we see something in addition to that, which is going to be super interesting in the next, I'm going to say, 5 years- 10 years, and it's probably going to start really kicking in in a year or 18 months from now. It's just a very rough prediction. That is the era of agentic. We're going to call it that. I'll come back in a later presentation what it means. What you should imagine is that today, all of the software platforms we provide have their own interface. It can be browser-based, or it could also be separate. Essentially, there is a form that employees will work with. There's a graphical interface that we work with, which is specific to each platform. The future probably looks a little bit different, especially according to Microsoft's view. This thing about understanding what does headless mean?
Headless means that there is no specific UX for each platform. It means that you interact with it. It could probably be through Copilot. You interact with natural language. You're not sort of in this form-based regime as before. The most abstract thing to get your head around is that you mainly, as a human being, are not concerned with the transactions themselves, but instructing an agent and telling the agent what to do and how to deal with these transactions going forward. This agent entity will do the actual work. It's a major shift, and I see a major upside in activity level for us because this is a completely different way of working and building organizations and operating model design, which will be very profound, I think.
Even if only 30% of Microsoft's vision comes true within this, it will be a profound way of or a profound level of change. I think if there's an interest for it, it becomes a little bit technical at some point, but we will try to do a three-slider on it at some point.
Yeah . Perfect. I think that was the last question. Thank you to you, Brian and Søren, for taking us through your results and through the question. I think we have got a lot further on by how your thinking is about the future. Thank you very much for that, and thank you for the people listening in and asking very good questions.
Thank you for joining.
Thank you.