Welcome to today's presentation, where we have the pleasure to present Inderes to all of us too. Today's presentation, we are joined by you, CEO Mikael Rautanen. Today's presentation, your half year report released, I think showed strong momentum in Q2 on both the top line and the bottom line, but I guess also a little bit of the facing off, of the East, unfortunately can explain that probably. Let's be wise on that. As always, you are encouraged to ask questions in the box down below during the presentation, but we will take most of the questions in the end. I think for now, I'll hand the call over to you, Mikael.
Thank you, Mikael. Good to see you again. Thank you everyone in the audience for joining, and questions very welcomed as usual, and happy to share our first half results with a new facelift we've done for our brand and also a new Inderes shirt. Let's move on to the January to June results. First half, overall, all the main financial indicators moving to the right direction, and bit of an acceleration on the second quarter. We're very pleased with 17% organic growth, and double EBITDA. As you said, with a year-on-year comparison, we had a bit of a tailwind on the second quarter because of the timings of the AGM production. The AGM season was this year a bit more weighted on the second quarter, as we indicated on the previous call.
Overall, we're growing in a shrinking market, more companies going out of the stock exchange than coming in at the moment. Why are we growing despite the conditions is that after IPO, we started to invest a lot in our new products and expanding the product offering. Those investments are slowly starting to be reflected in our organic growth, particularly strong growth in the AGM product and investor relations software. That's something we're really happy with. In the second quarter, also in the events business, that business area has been struggling with a very challenging market after the COVID restrictions were lifted. We're now seeing some small signs of demand picking up slightly, but there I need to remind that the visibility and order backlog in this business is relatively short. In that business, things can change quite rapidly. For now, looks good.
Sweden, we're growing. It's moving forward, 12% growth. However, that is not what we're aiming for. That is not what is our ambition level. We didn't go in Sweden market to grow 12%. Of course, our long-term potential and ambition are far beyond the current pace, and that's what we are working on very hard to get the growth engine started real time in Sweden. Overall, we can be satisfied with the first half of the year. Moving on to the Inderes Flywheel. Not much news on this front. The number of customers on the listed company side of the platform growing year-on-year. Some companies leaving because of buyouts and some small customers churn, and that being offset by wins of new clients. Number of Inderes active community members, that's growing year-on-year because it was bottoming out a year ago.
Quarter-on-quarter, it's relatively flat. We expect that number to decline in the upcoming quarters. That is because we've transferred our service to a new technical platform. On the new platform, the content is more accessible and more open than in the old platforms, where users don't need to log in to access the same content. We haven't been that aggressive in pushing users to log in, which we expect to be reflected in that number. Looking at the traffic on our website, how active users are, I'd say that's not declining, but it's neither growing. It's been relatively stable. Our headcount is 119. It's been relatively flat for a while. We scaled up the organization quite a bit after our IPO three years ago.
With the current capabilities and resources we have in this organization, we believe we have good capabilities to execute on the strategy we have outlined in May last year. Moving on to different business areas. We have 3 business units: equity research, events, and IR software. Starting with equity research, This business is very much Finland-focused. It's being challenged by the market conditions in Finland, quite a lot of delistings on the stock exchange. Despite that, we're growing the contract portfolio. That is thanks to winning a few new clients in Finland. The last ones we haven't yet gotten, we've been able to win, and also the new contracts in Sweden. We've been winning contracts in Sweden, but I need to say that it's not going as fast as we are expecting it to go.
We need to pick up the pace in commissioned research contracts in Sweden. Starting this business from scratch is always really hard work that we've seen when we started this in Finland. The first 10, 15 contracts, that's the most difficult part to build the brand recognition and name on the market. That hard work continues. In Denmark, happy to say we've reached a small milestone on the equity research front. HCA published the first commissioned research using the Inderes tools and Inderes model of doing research. That side is opened as well now. Revenue-wise, the research business, it's been stable and with a good profitability. Despite the contract portfolio growing, the revenue is stable. That's because of a decrease in project-related revenue. The recurring part is growing. Moving on to events. Events business revenue increasing both in Finland and Sweden.
Profitability is at a very good level for an event business. In Finland, we're happy that our market position has been strengthening, especially with our AGM offering. We've been able to offer wider projects for the AGM event productions. That has been growing. Also overall, we're seeing that the demand for hybrid type of events and online events is slightly picking up as we speak. What happened in this business when COVID hit, it was a huge boom in demand, everyone going to online events. Then when the COVID restrictions were lifted, there was a bit of a pullback, clients going back to physical-only events. That's a business area where we don't work because we're in the business of democratizing information, and everyone should have access to information.
Especially in investor relations, it's always a hybrid or online events to allow everyone to access the information. We're in the hybrid and online business, that kind of pullback affected us for a long time. Now we're seeing, and maybe some clients are also noticing that there's actually many good parts in doing your events in a hybrid way, and that is being reflected on that. Also Capital Markets Day season is an important element for this business area. Software part of the business growing very strongly, revenues. We actually reached breakeven profitability in the first half. After several years of very heavy investments, negative profitability, now very encouraging that we're already reaching a breakeven.
That is, of course, supported by the license sales of AGM Software in the first half because that is very much weighted on the first half of the year. Anyway, this is something we can be very proud of. We started to build this business from scratch four years ago, now we're seeing we have a really strong team. We have great client references. We have very satisfied and happy client bases, and we also have good commercial traction on this business area. That's something we can be very happy with. On the first half, we continued to strengthen our position in the AGM market in Finland.
That business area used to be dominated by one player in the market, and we've been rapidly able to take over a very big part of that market with our very good product offering in just a couple of years. I think that also demonstrates both the innovation and execution capabilities we have in this company. Also, the IR website and press release system growing strongly in Finland. The strong growth I'm speaking about here is very much driven by Finland and in Denmark and Sweden we're on a piloting/market research phase with this business. I like to say that with the software side, we do have capability to build it into a good and profitable business in Finland only, but if we can reach a Nordic scale, then it can be very valuable and profitable business for us in the long term. All right.
Any questions, Mikael, at this stage, or should we move on?
No. I was thinking a little bit about what is it that are driving the event business outside the AGM. Is that purely macro? Is that what you're looking at? The better the macro, or is it also that the demand is coming a little bit back for hybrid events? You mentioned the CMD season, Capital Markets Day season. I guess that's a normal part of your business, the event business that has gone away and maybe starting to come in a little bit again, what are the drivers behind the You might say, if I as an analyst should say, "If this gets better, then this business probably also gets better.
Yeah. Definitely there's a macro element, also somewhat that's more difficult to put a finger on the how much it affects the event industry trends in general. Last year in the second half, we saw customers literally pulling the handbrake in all spending, that was very much reflected in the event business. That was very macro-driven. When clients need to save money, they either cancel or postpone the events or don't make them as big as they planned, so they save costs there. That's something we see. When it comes to investor relations, of course, that's somewhat obvious that when the company's performing well, they are happy to spend more money on investor relations.
Yes.
When they are not performing well, they don't usually want to make that fancy and nice-looking events and so on, or even hold a Capital Markets Day, for example.
Yeah.
There is a macro element.
I get the Capital Markets Day is a big part of this equation outside the AGM and investor calls, I guess. Is that correctly understood?
Yeah. What brings stability to that business is, of course, AGM, because companies need to hold AGMs every year, no matter what the macro situation is or even the pandemic situation. The quarterly presentations, they are, of course, very strong recurring element in that. Everything outside those two is more or less predictable business, I'd say.
There must be some pent-up demand. You can postpone a CMD one year, but it's not normal for a lot of companies not having a Capital Markets Day for three years.
Yeah. No, exactly.
coming out. Yeah, that makes a lot of sense. The other one was, now you said you will break even profitable on the software side. I guess it's not all recurring revenue that is lying in the software because there's also some elements that you're selling. Is this half year profitable and that full year maybe, have you reached a level where you might now say in a normal software business, when you reach a certain level, then it's so stable that you can say it's profitable from now on? Is it a little bit about the phasing and a lot of the AGMs, I guess, software lying in this quarter?
I need to think how much I can-
Yeah
tell about that. Yeah, the first half there's a big impact from the AGM license sales, and that is project revenue. Of course they are It's kind of like-
Yeah.
reoccurring project revenue.
Yeah.
That supported, and that we don't have in the second half. The recurring revenue base in that business is growing also very nicely.
I will not ask you anymore. I know if you don't guide in an area, you are not allowed to tell me whether you are profitable full year. I will let you off the hook. Let's look a little bit at the financial figures, I have a little bit more questions.
Yeah. I'll walk through this quite quickly, a bit more detail on the financials. First half, first of all, Sweden now representing 21% of revenue and recurring revenue 55%. The project revenue on this half grew a bit faster than the recurring revenue. Cost-wise, on the materials and service level, with the big event productions and AGMs, that's the biggest driver on that cost. Otherwise, we've been able, as planned, keep our fixed cost relatively stable, which is why the profitability has been improving, especially in Q2. Adjusted EPS up to EUR 0.50 from EUR 0.34 last year. Really good growth there. Here I'd like to highlight that why we report the adjusted EPS or reporting under Finnish Accounting Standards, which means that the acquisitions we've made in the past, we amortize the goodwill from them every quarter.
Depreciation of consolidated goodwill that's an accounting item that affects our number. We think it's fair to adjust the EPS from that accounting item to reflect the true performance of our operations. On the second quarter, 17% growth, and that's fully organic. Last year there was a strong non-organic element in the growth from the acquisitions, and a significant improvement in the profitability, because the cost base has been fairly stable. Balance sheet. We have a healthy, strong balance sheet. Continue to make strong cash flow. During the first half, we paid the last installment of the Financial Hearings and Streamfabriken acquisition. We were able to finance that part with our cash flow. That was EUR 2.9 million. We didn't need to raise any external capital to pay the last part of the acquisition.
That acquisition is now fully paid for the sellers. Cash flow is very strong, up 35% from previous year. The profit we're making, we are of course as an analyst company, we understand the value of cash flow. We're able to turn that profit that we make into strong operating cash flow.
Of course that was the first question on my blog. Is there something unusual? You're growing this 35% on the EBITDA line, 17%. I know of course there's something with the depreciation, is this some kind of cash flow ratio we should expect from the company of yours because you have a lot of prepayments and growing that if you make this around on the EBITDA, you also make almost twice that on the cash flow side. Is that kind of a good proxy for you or is there a little bit phasing or maybe some lower investments in this quarter that is helping that?
Good question. From H1, I wouldn't make a formula that this is how it works from now on. If you look at longer perspective, yes, we've been able to convert the profit into very strong operating cash flow over time. Of course, there are seasonal variations with the working capital and well investments we don't have usually that much. Also the fact that we're quite disciplined in that when we sign contracts, for example, if we sign annual contracts, we usually invoice them upfront to make stronger cash flow. That's an element we've been throughout the history very focused on.
I guess, I haven't been aware of that means if you can make this, you cost all your development cost, is that correctly through the P&L? You don't take anything on the balance sheet because then this number would be hard to reach at a good ratio. Is that correctly understood?
Yes, exactly. All the R&D expenses are booked as expense and nothing is capitalized on the R&D front.
Perfect
We prefer to keep our balance sheet conservative.
Good.
Outlook, that's unchanged. Expecting revenue to grow from last year and EBITDA to improve. Lastly, a few words on the strategy. A bit of a reminder and a few thoughts on the equity research front on the big picture as well. To remind you, this is the four main products we're focusing on in our strategy. This is the product portfolio we have built over the last five years. Five years ago we only had the equity research part and this is something we've been building and putting together very successfully over the last five years. Starting with equity research, there we are. We've, in Finland, reached the physical limits, I could say, of growth with the number of contracts we have versus the number of companies on the stock exchange.
Obviously in that product area, if we want to grow, and yes, we want to grow, it needs to be a geographical expansion. That's why the strategy and the investments are so heavily focused on, especially in Swedish market. In IR events, it's pretty much the same story in Finland. We have a very strong market share. It's difficult to grow in Finland without new IPOs, but we are still growing. There in Sweden, we are also the market leader. In Sweden, despite that we are market leader, we have very significant potential still to grow in this product category with the strong offering we have for the investor relations. AGM, again, the same story. Extremely strong market share in Finland in a short time. We're still able to grow in Finland with the a bit more wider offering on the AGM front.
There, again, we're piloting in Denmark and Sweden and closely looking those markets over time. In IR software, that's very Finland-focused. We still have a lot of room to grow in Finland in this product category because it's so early and doing the first pilots in Denmark and Sweden.
There's a question there, how many approximately IR press distribution system customers do you have in Finland now and are you rolling this out also in Sweden?
We haven't disclosed that number in Finland yet. Maybe I'll leave that away because we haven't disclosed the number.
Yes. That's totally okay.
I think I'll come back to that later on. In Denmark, we do have the regulatory approval for the product now, so we have the first client in Denmark live. In Sweden, we don't have yet the regulatory approval for the product, so we're not yet there in Sweden.
Perfect.
On the market side, focused on three main markets. Sweden, the most dynamic and advanced capital markets in whole Europe. That's going to be our main strategic growth driver in the strategy period up till 2027. Finland, we continue to grow with our expanded offering, and despite the current quite pessimistic environment, we do work actively on the IPO front as well. It will eventually pick up at some point, but let's see when. In Denmark, collaboration with you guys at HC Andersen Capital. With the equity research, I wanted to touch upon these statistics from European Commission. They are monitoring the key indicators that indicate the healthiness of the capital markets of different countries.
I really like this, that one indicator they see that is reflecting the healthiness of the capital market is the analyst coverage of small and medium-sized listed companies, which is also a stamp that what we do is also noticed on a political level and important for the whole capital markets ecosystem, the economy as whole. If you look at Finland, I'd say we've done a bit of a miracle in Finland with only 20% of the companies not having analyst coverage. Basically almost all listed companies in Finland have analyst coverage, and that's very much driven by Inderes. Looking at these statistics, we can say that equity research and investor information is not democratized in other countries yet. There's a lot of work to do. There's a lot of potential in the market to replicate the thing we've done in Finland.
That being said, this is very much a game about building a new market instead of winning the competition. We need to be able, together with the whole market ecosystem, establish a working market for commission research, because that is the only way to make equity research available for all the investors and all the listed companies. I haven't seen anyone coming up with any other solution to solve that problem.
No, this figure tells the story right there. If we haven't figured it out for 25 years on a non-commission basis, probably it's not going to solve itself by a magical stroke. I think you're right there, yeah.
Yeah, exactly. Finally, targets. As a reminder, we aim to have a combined revenue growth rate and profitability of 30%-50%. The thinking behind this is that if we're on that level, we can say that we're running a healthy business, and that we are good in what we do. Those two things are the things that our organization and we want to achieve, and the strong financial performance is a result of that. All right. Shall we go to the Q&A?
Yeah, we can. I think we catch a lot of them. You already answered the one I normally use. Flat is Finnish market IPO. When do we expect it to start? I think you gave the best answer probably everybody has. A little bit on the Swedish side. You are talking about that it's not delivering to expectations. Are you thinking on changing something in the model? I know you are very firm on your principles and such, but is there something that you are thinking about changing, moving the Finnish model to the Swedish market to try and gain a little bit more traction?
The core principles of this company and the way we do equity research and that philosophy, there are some things that we want to keep unchanged, like the independence part and so on. When it comes to, in general, the go-to market of Inderes to a new country, we don't have a recipe for that one. We need to test, test, fail, test, fail, and experiment and find the go-to-market model, how to establish this business model into a new country. There, I think it will be a lot of experimentation before we find that model. We've had some learnings from our history in Finland, but it would be naive to think that the way we built this as a startup in Finland once during a different time would one-on-one work when going to another market.
We need to have a type of a startup mentality and a lot of experimentation and not being afraid to fail also when finding and learning the recipe for go-to-market into new country.
I think that was the main questions I had on my blog, Mikael. Thank you for taking us through your results and answering questions, and thank you for the people listening in.
Thank you, Mikael. See you next time.
See you.