Good afternoon and welcome to Enento 's Q2 earnings webcast. My name is Henrik Soras and I'm the Head of Investor Relations and Strategy for Enento Group. Today I'm joined by our Interim CEO Elina Stråhlman. Elina will start by covering our second quarter highlights and business area updates. She will then continue by sharing more detailed insights from our financials and close the session by covering our outlook and priorities for the rest of 2025 as well as our updated long term financial targets. Following the presentation, we will open the floor for questions. Feel free to submit your questions at any time using the webcast tool. Without further ado, I will now hand it over to Elina to get us started.
Thank you, Henrik. Warm welcome on my behalf as well to the Enento 's Q2 webcast. As usual, let's start with some highlights. The macro-economic environment remained challenging in our key markets during Q2, continuing to negatively impact the demand in consumer credit information business. This turned the group's net sales into decline. However, demand for business information was again more resilient and Business Insight net sales were stable. We saw strong growth in Norway and Denmark, where we also have launched a new service to support growth further. Also, real estate and compliance services continue to grow with high rates and were supported by previously launched new services. We are also continuously developing our offering in this area. Now during Q2, we introduced new innovative and unique compliance services in Sweden.
In Finland, we launched a new property ESG API that is complementing our real estate offering, where demand in general continues to be high. During the quarter, we also successfully completed the IT infrastructure consolidation in both Finland and Sweden. Although the optimization of the environments continues in the short term, the transition is an important milestone supporting both the efficiency and our operations, quality, and security. Going forward, our adjusted EBITDA margin improved sequentially compared to the previous quarter, but declined year over year due to lower sales, weaker sales mix, and reduced capitalized development investments. While we continue to invest in a focused manner to new growth opportunities, we at the same time continue to keep our costs and cash flow in good control. Briefly about key financial figures for Q2 that I will then come back to in more detail later in this presentation.
In Q2, our net sales were EUR 38.6 million and decreased by 1.7% at comparable FX but increased by 0.5% at reported FX rates. The share of new services from net sales remained high at 9.3%. Many new services, for example in compliance and real estate, continued to perform well. The decline in sale of new services is mostly driven by a timing impact since some larger services that are launched more than three years back are no longer included in this KPI metric. Adjusted EBITDA reached EUR 13 million and margin landed at 33.7%. Our free cash flow improved to EUR 6.6 million and cash conversion increased significantly to 66.4%. Adjusted EPS improved EUR 0.30 for the quarter, up by 3.8% from last year, and our leverage remains within our target range with net debt to adjusted EBITDA at 2.9 x.
Now let's focus more on the business areas' performance and progress we are making on our strategic priorities. Starting from Business Insight, Business Area's net sales development were stable and was supported by good growth in compliance and real estate as well as continuing good development in Norwegian and Danish SME businesses. During the quarter, we also had important new service launches. In Sweden, we launched innovative beneficial ownership and company sanctioned screening services within the field of compliance. These new services are important milestones in our journey of strengthening our position within Swedish business information markets, an area where we have room to grow further both within the financial sector and other customer verticals. These new compliance services are available via our new online distribution channel User Insight, which also supports our positioning in the Swedish markets.
We have already signed a larger financial sector client as a pilot customer for these new compliance services, and we see good traction towards these unique services with our customers. In Finland, as mentioned, we launched a new property ESG API, which very well complements our real estate offering and has received interest from banking customers. We also launched a new Proff PLUSS service in Norway and Denmark, enhancing our value-added offering in those markets. I will share some more details about that in the next slide. The Swedish premium business transformation is at its early stage, and as mentioned previously, we do face short-term revenue risks, but the medium and long-term impacts are expected to be positive. The key in this transition is to turn the fixed-term subscription contracts into continuing contracts, which will increase sales efficiency and improve customer experience over time.
As mentioned, we are also continually expanding our foothold in Norway and Denmark by enhancing our offering with additional value-added services. As latest in Q2, we have launched the Proff PLUSS service in Norway and Denmark. This service aligns very well with our Nordic and data-led strategy. It is something that we have already in place in Sweden via Allabolag and are now taking into Norwegian and Danish markets. Based on the good experiences we have in Sweden and thanks to our Nordic front end [NUCs] that was launched last year, we can now efficiently launch new online SME services across these markets. The service provides customers with more comprehensive company information, monitoring tools, segmentation capabilities, and a modern, easy to use and easy to buy user interface.
The service is offered as a recurring subscription, and we believe that this service will further support the good development that we have seen in the past months and years in Norwegian and Danish markets. Moving on to Consumer Insight, Consumer Insight's net sales declined by 4.3% at comparable FX rates, and the operating environment remained challenging. Consumer confidence remained low in both countries, Finland and Sweden, impacting the volumes negatively. We have seen stabilization in the Swedish volumes over the past months, but the outlook continues to be muted due to uncertain macro-economic and regulatory developments. In May, the Swedish Parliament voted in favor of the proposed bank license requirement for loan brokers and credit institutions, and the scope of changes was as we expected.
The legislation has entered into force on July 1st, 2025, and it will be fully implemented in July 2026, meaning that brokers need to have a banking license in place before July 2026 to continue their operations. Despite the macro headwinds, we continue to see good traction in new customer verticals in Sweden as well as new finance sector customers. In Finland, we have signed new customer deals in both countries, and in Sweden, we have also successfully expanded our foothold further in the telco sector where we have just signed a new deal with new important customers from 2026 onwards. Interest in our fraud prevention and real-time data, meaning PSD2 solutions, remains also high, and although sales cycles are long and we continue to sharpen our commercial actions in this area, we continue to believe in these opportunities.
In Finland, our new value-added Rating Odin service that we launched in Q1 has also started generating first orders with more customers in the pipe. Overall, we are proceeding in many fronts despite the challenging operating environment that impacts the volumes. Now let's continue with the Q2 finance sustained in more detail, starting with our key figures. As already mentioned, our net sales reached EUR 38.6 million and declined by 1.7% at comparable FX. This was due to the continuing decline of consumer credit information business. There was one business day less in all our markets, which also impacted the sales development. Previous year sales was also supported by one-off transactions. Despite the year-on-year decline, the revenue and volumes have shown signs of stabilization, which is also visible in quarter-to-quarter development. Adjusted EBITDA reached EUR 13 million and decreased by 9.4%. At comparable FX rates, the margin ended up at 33.7%.
The development was impacted by declining sales, weaker sales mix, and lower amount of capitalized development. Following the infrastructure consolidation, adjusted EBIT declined to EUR 10.2 million by 7.9% with slightly slower pace than adjusted EBITDA. The development was supported by decrease in depreciations that has been impacted by our CapEx optimization actions as well as heavy focus on the infrastructure transition during the past year. Good to note that infrastructure transition also impacts slightly our EBIT and EBITDA profiles following the fact that we no longer own hardware in any of the countries but purchase those as a service. This means that previously depreciated costs are visible now in other operating expenses instead. Our leverage increased slightly to 2.9 x but remains within our comfort zone below 3 x as mentioned. Let's go through the development of revenue in Q2 in a bit more detailed manner.
Business Insight generated EUR 23.4 million in revenue, remaining slightly on the growth side and growing by 0.1% at comparable FX rates. Real estate and compliance businesses, as mentioned, continue to grow well thanks to both strong demand and support of new services. Enterprise business development was slightly negative following the mentioned one business day less impact and one-off revenues that supported the development in the comparison period. Volumes as such have remained stable. Premium SME business continued to deliver strong growth in Norway and Denmark. However, Q2 was more challenging in Finland and Sweden due to the muted operating environment, which impacted both new sales and customer churn. Churn was especially visible in the certificate sales where many customers no longer qualify for the certificates due to their declined financial performance.
In Sweden, the premium SME transformation is ongoing and is at its early stage, and we did not see any material impacts. Realizing due to the transformation now in Q2, Consumer Insight revenue reached EUR 15.2 million and declined by 4.3% at comparable FX rates. Volumes continue to be impacted by the challenging operating environment and low consumer confidence in both countries, Finland and Sweden. In Sweden, usage of the loan broker segment continues to decline year over year, offsetting the solid development in other segments and new verticals. However, we see signs of stabilizing volumes, and loan broker volumes have remained stable but low pretty much throughout the first half of the year. In Finland, the volumes remain on the same level as in Q1, but last year the development was supported by one-off sales such as consumer credit register implementations that impacted the comparisons positively.
The short-term outlook for consumer credit remains muted, and we do not currently see immediate signs of growing volumes in either country. We continue to focus on expanding to new verticals and successful commercialization of new services. This slide shows the development quarter by quarter and makes it very visible that the revenue development in euros has stabilized during the past quarters. Business Insight has been stable or on the growth side for over a year now. Consumer Insight has continued to decline year over year, but the revenue development euro-wise has clearly stabilized. Continuing with the profitability, in more detail, our adjusted EBITDA landed at EUR 13 million in Q2, and the decline was driven by lower sales, less favorable sales mix, reduced capitalized development, and increased investments in commercial activities. The adjusted EBITDA margin declined year over year but increased quarter over quarter.
Looking at the line-by-line development on the cost side, the development is similar to previous quarters. Meteor license services, meaning our data acquisition costs, continue to be impacted by growing variable data costs connected to growing sales in Finnish real estate and consumer marketing services. Also, the price increases in the Finnish governmental data increased costs for materials and services. Likewise, personnel expenses continued to be lower than prior year as well and were somewhat also impacted by positive timing and one-off impacts, while other operating expenses increased following the investments in sales, both related to marketing activities of new services and increased sales commissions related to strong growth we are seeing especially in the Danish markets. Lastly, production volumes, meaning the capitalized development hours, were impacted by the infrastructure transition.
The transition has impacted our ability to develop new services during migrations and continues to impact that and the maintenance efforts still in the short term when optimization of our IT environments continue. Moving on to the cash flow, free cash flow remained healthy and was good at EUR 6.6 million and increased around EUR 500,000 from previous year's Q2. Cash conversion improved significantly to 66.4%. Items affecting comparability, meaning mainly payments related to infrastructure consolidation, impacted the free cash flow in Q2 by EUR -2.1 million. Adjusted free cash flow, where these items are excluded, resulted at EUR 8.7 million and also improved from previous year's level. The improvement in free cash flow was driven by solid operating cash flow, favorable working capital changes following timing of payments, and lower investments. Likewise, and finally, a few words about our financial position and other key indicators. Our financial position remains solid.
Cash at the end of Q2 was EUR 8.8 million and our EUR 30 million credit facility remains fully unused. Net debt to adjusted EBITDA was 2.9 x and we remain comfortable with our leverage level and liquidity situation, also considering our guidance and cash flow generating capabilities going forward. Gross investments were EUR 1.5 million, clearly lower than last year, and the decrease is a result of our CapEx optimization actions, increased focus in development, but also impacted by the high focus on infrastructure consolidation. Our largest investments related to compliance services and Swedish premium production modernization, reflecting our focus area in strategy execution as well. Finally, our adjusted EPS improved to EUR 0.30 and was supported by lower financial expenses and taxes as well. Now let's look ahead to the rest of the year and review our freshly updated long-term financial targets.
Firstly, I want to highlight that our priorities for 2025 are clear. Despite macro-economic uncertainty, we are seeing signs of stabilization in the consumer credit and there are many growth pockets across our markets that we continue to focus on. We aim to retain and protect our core services in Finland and Sweden while advancing new services in compliance, fraud prevention, and real-time data. We continued with high focus on commercialization activities. We also continue to transform our Swedish premium SME business to a more digital and recurring business model where there is a significant potential for improved sales efficiency and, in the longer term, increased focus on new sales as well. We also remain focused on improving efficiency, maintaining profitability, and strengthening free cash flow as we have been successfully doing during the past years as well.
Although the second quarter was more challenging, our outlook and guidance remains unchanged. We expect net sales to be between EUR 150 million and EUR 156 million and adjusted EBITDA to be between EUR 50 million- EUR 55 million in 2025. There continue to be signs of a gradually improving macro-economic situation and the demand for business information services remains stable. In Business Insight, we see more solid demand in Finland, Norway, and Denmark, whereas the situation in Sweden continues to be more difficult and is impacted in the short term by the premium transformation related to SME customers. In Consumer Insight, we continue to face muted but stabilizing consumer credit information volumes, especially in Sweden, which is also impacted by the regulatory changes being implemented. Our focus is on various commercialization activities to support new sales.
We also remain committed to disciplined cost control, strengthening free cash flow, and investing in future profitable growth. As mentioned, our current strategy remains valid and we are fully committed to delivering sustainable profitable growth and maximizing shareholder value. We are confident that we can deliver 5%- 10% annual sales growth and reach an adjusted EBITDA margin of around 40%, but this will take longer than previously anticipated due to the challenging operating and regulatory environment. As a result, we have made a decision to maintain our long-term financial targets but without a defined period for the achievement of these targets. We aim to maintain our position as a profitable growth company. Our core strategic priorities remain the same and continue to offer growth opportunities beyond 2025.
In addition to growth pockets, we have systematic efficiency drivers that have potential in the mid to long term, such as Swedish SME premium transition. We also continue to have further opportunities, for instance within IT. There is thus room to improve margin both via scalable growth and efficiencies over time. Also, our dividend policy remains unchanged, and we aim to continue having an attractive capital allocation for our shareholders. Our capital structure related target of net debt to adjusted EBITDA ratio also remains just the same, below three times. Thank you on my behalf, and let's open up for some questions. Henrik, please join me.
Good. We have quite a lot of questions on different topics. I think we can first start from the guidance. There's a question that based on your guidance, which you kept intact, you would need to reach basically stable EBITDA in H2 to arrive at the lower end of your guidance range. How will you manage to do that? Is it through cost savings and the ending of the infra project, or through top line growth, or perhaps better mix?
I think it's going to be impacted by several factors. We are constantly looking at our cost structures, taking actions to improve our efficiencies, while we also have made successful moves on the commercial side that are supporting also the H2 development further. A combination of various factors, and as said, we feel confident about the guidance for full year.
There is a question related to the new service development. You mentioned that new service development will be lower in Q3 as well. Should we expect activity to pick up again in Q4?
I think that we can expect rather similar development still for Q3 and Q4. We have larger new services dropping off from the baseline now, including, for example, the daily credit register in Sweden that impacts the baseline. Of course, we can assume then gradually improving figures again going forward when we, for example, start seeing good commercial traction with new compliance services in Sweden, for instance.
I believe the question also referred to the development activity and production for own use. Can you comment still on that?
Yes. The development activities continue to be on lower level in Q3, or that is our expectation. Currently, our focus is on optimization of the IT environments now after the successful migrations, and that will naturally impact our capacities focus in Q3.
There is one question related to BI certificate sales. How does their sales work, and will the revenue continue to decline year- over- year if the environment remains soft?
Yes, yes. How the certificate sales in general work is that if a company qualifies once for the certificate, that is renewed automatically in the next year if the company continues to qualify. Of course, now what has happened in this challenging macro-economic environment is that fewer companies qualify for certificates. Whether it's, for example, the NORI growth certificate, if you are not showing growth in this kind of environment, you no longer qualify for the certificate. If your credit position is weakening, that also impacts how you qualify for certificates. These have now impacted the churn negatively. We have seen especially the churn increasing in the construction industries. Obviously, this kind of development we can expect to continue if the overall operating environment remains as challenging as it is now for SMEs.
There is one question, or actually two questions on the same topic, so we can combine them. BI Sweden SME transformation, can you discuss the magnitude of the highlighted short term revenue risks in the Swedish Business Insight Premium business?
Annually, as we have stated before, the revenue for the full year is around EUR 10 million on a yearly basis. Of course, we have half a year left of that. In that sense, one can already calculate that the risk is somewhat limited. However, we are ongoing transition also in terms of our sales partners who are restructuring their operations, and we see that that may have some impact on the sales and turn the sales into decline.
There is one question related to the infrastructure transformation and the stabilization or optimization phase. Are the costs coming down? What is the work that continues to keep the costs up?
We have made huge migration and transition of the operations to one vendor, TCS, to be specific, as mentioned before. Now once the migrations have done, and we have actually in many cases outsourced parts of the operations, the new situation requires us to optimize the operations and also the environments to this new situation. I think this is quite natural, a usual thing that takes place after this kind of larger, larger migrations. This will also impact our own IT staff's ability to develop. It will also of course require focus from them to secure that operations remain stable. We get all the processes in good shape and so forth.
There is one quite detailed question related to depreciations and amortizations. Can you quantify the annual run rate impact to depreciations and amortization from the switch of hardware to service processes?
The annual run rate is roughly, on very rough terms, it's EUR 500,000 . Of course, one needs to remember that previously, when we used to own servers basically in Finland, the timing of investments in those impacted the amount of depreciations as well, and what kind of lifetime each hardware had and so forth.
There are a few questions related to loan brokers and macro. I will start first with the loan brokers. You probably have discussed with your broker channel clients in Sweden. What is your own analysis how the market of loan brokers will develop over the next 12 months?
Yes, yes. We have naturally had a lot of discussions with loan brokers and we see that the four largest ones basically have, one could say, pretty much 90% of the markets in Sweden. Those largest brokers, based on the discussions, will apply for the license and continue to operate in the Swedish markets. There is a long tail of smaller brokers who most likely, at least some of them, will not apply for a license. It is too cumbersome a process and too heavy operations to run for a small business. We expect those to either consolidate with existing players or reconsider their operations in one way or another. Here we talk about roughly a 10% portion of the loan broker segment.
Exactly. Basically, the 4.5 largest loan brokers are roughly 9% of the total loan brokered market volumes.
Yes, yes.
Good, there's one question related to macro. What exactly are the signs that you refer to regarding macro-economic improvement in Finland and Sweden? Most financial institutions have cut their GDP estimates, at least for Finland. What do you mean by improvement?
I think that we mainly refer to stabilized development in general. However, we are seeing, for example, in Finland some consumer lending banks considering returning to the Finnish markets or restarting their operations, for instance. There are some signs of increased activity in that sense.
Good. There is one question related to our balance sheet. Your leverage is already close to the final CL target upper limit. Given the prevailing uncertainties, how comfortable you are at these levels, should we expect changes to the four year track of s table dividend
As I mentioned in the presentation as well. We feel comfortable with our leverage levels, we feel comfortable with our cash flow generating capabilities going forward. We are also comfortable with the dividend policy that we have in place and want to keep attractive capital allocation for our shareholders.
There is actually still one question about the consumer credit business. You are talking of signs of stabilizing consumer credit business. Are you referring to underlying market or the total business opportunity including broker channel revenue for Enento?
What we have seen now specifically starting from the Swedish markets is that although the loan broker volumes year on year have continued to decline, we have seen stabilized volumes month by month, basically throughout the first half of the year. We haven't seen drastic decline continuing month by month. There was a clear decline in the volumes in late Q4 last year, but pretty much after that the volumes have remained stable. Also, the volumes related to other verticals and lending have overall month by month remained stable.
Good. There's one last question, a bit more forward looking. How lean your cost structure is now looking forward to 2026 and 2027 should the sales pick up? Do you see need to invest also in OpEx?
We are of course all the time balancing our OpEx investments and for example our investing in go to market commercialization of our products, as was visible also in our Q2 results. Our cost structure, as also mentioned, we continue to have efficiency pockets still available. SME transition is an area that is expected to increase our sales efficiency and improve profitability in the mid to long term. Another area where we are constantly looking into further efficiencies is it of course now we have completed infrastructure transitions and of course now being with one vendor enables us to again start looking into further efficiencies and next steps in that journey.
Good. I think those were all the questions. Thank you on my behalf.
Thank you on my behalf as well, and have a wonderful summer.
Thank you.
Thank you.