Welcome to today's presentation, where we have the pleasure to present Inderes. To help us through today's presentation of the result and answer questions, should there be any, we are joined by CEO Mikael Rautanen. In today's event, we take a look at the Q3 result just released today. Q3 looked pretty strong, but I guess that's a good season for you. But you also sounded a little bit more optimistic in your words, and you must know, as a CEO and an old analyst, that that get taken up by market. So let's dig a little bit into that. We should also mention that we should have full disclosure, that we have a partnership, and you have an ownership in H.C. Andersen, so that's full disclosure on that. And you're very welcome to ask questions in the box down below.
That was the bookkeeping part of this event. Now, I think I will hand the words over to you, Mikael.
Thank you, Michael. Good to have the presentation again with you. This is the fourth time today I'm gonna be running this presentation, but I bet I still have the energy to go through one last time the numbers and the quarter, which was pretty good for us. So, overall, the positive development continued on the third quarter, 11% growth. We've said that it's a shrinking market this year, so we are growing, which is a reflection of the strength of our product portfolio and also the new products gaining market share. All businesses were performing strongly. Every business was growing, and this year most of the growth has come from the really strong growth in our software business.
EBITDA margin, 24%, that's a really strong level. There's a seasonality factor in our cost structure, why Q3 is typically a strong quarter in terms of profitability, but yeah, 24%, we're really, really pleased with that profitability. Then we noted also on the release that there are a few signs of the market conditions picking up. I mean, we've been going through quite a headwind for two years now. Now we can't say it's a tailwind, but at least it's not a headwind either.
So, some positive signs on the market, some clients stepping up their investments into serving investors and putting more effort on doing good investor relations and service for their owners, while, yes, there are some clients also with cost-saving pressures still. One concrete thing about the market conditions picking up is the IPO activity. That is now. We've been speaking about it for a long time. The activity is still there and has been there, now it is materializing into concrete offers for IPO projects that are targeting next year and the year after. So, some positive momentum on that front as well.
Here I need to remind that the IPO game is such that it might close down overnight if the market turns, but right now, we have reasons to be optimistic about that one, and the IPOs they are important for the market growth for us, and then especially in Finland, we have a very compelling offering for the IPO companies, get a one-stop shop for setting up the IR capabilities and doing the IPO communications, and then the continuous services afterwards, so we're very well-positioned for that market if and when it picks up. Moving on to the Inderes Flywheel, so here not much of a speed, I'd say the flywheel keeps spinning, but the changes are 1%, 1%, and 0%.
So, not any major changes here. In Finland, there's due to delistings, the customer count is decreasing slightly, while it's increasing in Sweden. The number of active community members, that's flattish. We migrated to a new platform where we have decided to keep more and more of the content available for the users without asking them to log in, which affects this number. We're looking into probably next year, we're gonna start reporting reach numbers in addition to the active community member number, because that's the way to reflect our the strength of our platform and the reach, which is relevant again for the listed company clients.
Moving on to different business units, so starting off with equity research, we're still growing the number of commissioned research contracts, so it amounted to 149, slight growth year on year. In Sweden, honestly, we still need to keep exploring to find the best go-to-market model for that market. It will take time because the market has a bit different dynamics, especially compared with Finland, with the more marketing-oriented perception of commissioned research, and so on.
It's also finding the tactic and go-to-market model, but also changing the culture and philosophy around research, and the need for research. Independent, high-quality research is out there because there's over two-thirds of Swedish-listed companies in the small-cap and mid-cap category that don't have any analyst covering them. The market there is the need for that in the market, and we will find the model to tap into that opportunity. The long-term game here, I'd like to remind, this is a game to win the investors. This is not a game to win the companies.
In this business, you need to win the investors, and if you win the investors and they trust you, then you will win the business as well, and that's why you need a really long perspective in this business area. Moving on to events business. So this business has been in a lot of turbulence over the last five years because of first COVID coming in, then everything going to zero, then everything exploding the demand, and then with the lockdowns and so on, demand going up and down. Now, I'm happy to say that this is becoming the first stable year with no surprises, no bigger surprises and small signs of recovery after some difficult years. So, growing both in [audio distortion]
and stable, both in growth slash stable in both Finland and Sweden. And here, the strategic decision we made, and that was already five years ago, we will build the strongest provider in investor relations events in the Nordic region, and that is our core business. That is where we have the strongest competitive advantages with the technology platform that we have, the Videosync platform, and with the investor media and the reach we can provide. And this is our core business. In the events market, for everyone else, this is just one segment in their offering,
Mm.
And that's why we've been so far really successful in this market, and I believe there's a clear need to build a Nordic provider for this business area, and we're moving forward in that strategy. And a reflection of that is that we are serving the most demanding and also the biggest blue-chip companies in the Nordic region in this business area, which is kind of like a sign that we are the trusted partner for really demanding clients. Then the third business area, the software business, that's the smallest business, but it's the fastest-growing business.
And the story here has been we've been in a product development phase for several years, and then shifting, transforming from the product development into commercialization phase, first in Finland, that's going really well, and the second stage is internationally. And it's going really well. We're in all product areas, Videosync, the event platform on which actually this event is running as we speak. Videosync, that sales is going sales is going well. AGM, we had a really good year, a really good season in the spring, now gearing up for the next season.
And then the IR software, with the press release system and the release distribution system, website solution and the release distribution system, also gaining new clients in Finland, and first pilots in Denmark and Sweden.
I might say this is, when we think about it, by us, and I guess it's the same. This is need to have, events is a little bit more nice to have. I know it's a hard word to use, so is that what you are seeing? That... Can you see here that this is growing? That is a sign that the companies are still watching out for the money, and maybe the event side has stabilized, and you're seeing a little bit uptick there. But this is still that companies are very cost-focused and need to have. You have success, the rest is more flattish and stabilizing. Is that kind of the explanation?
Yeah, I'd say partly. One reason why we've been successful in this business area is that we are also really cost competitive compared with some other providers in the market. Or another way to put it is the IR software market needs competition and the AGM market needs competition. It's been a monopolistic structure in previous history, so there's obviously a need for competition. If there's a monopolistic structure, then usually it's a very attractive market in terms-
Obviously
... of pricing.
Yeah, yeah.
And yeah, this is mainly kind of like must-have.
Yeah
... solutions for the listed companies, while research is more on the nice-to-have side.
Nice to have. Yeah.
Yeah, yeah. All right, then let's dive in a bit deeper into the key figures and outlook. I will go through them really quickly. So year-to-date, January-September, 9% growth, that's fully organic. Sweden, 21% of growth, so Sweden growing slightly faster than the group level. Recurring revenue, 59%, so project revenue this year picking up slightly faster than recurring. Recurring revenue growth mainly driven by the software side of the business. On cost structure, our cost has been fairly stable this year. So that's why the bottom line, EBITDA, has been growing faster than revenues. Going to the Q3, so 11% growth, and really strong.
We had quite strong September, project revenue growing in Q3 17%, recurring by 9%. Cost structure fairly stable, and that's why very strong, it's actually a record profit, record profitability during our life as a listed company, 24% EBITDA. And the seasonality factor here, why the Q3 profitability is so strong is because the holiday accruals, how we book them in the Finnish accounting, is that we release the holiday accruals in July, which means that we don't have almost any personnel expenses booked for July. So that lifts up the profitability. That's an accounting seasonality factor.
So you talked a little bit about that, yeah, that we should expect a little bit higher cost going into it. Is that the explanation, and you're also moving... It's not that you're increasing your investments, it is just, it's what you might call a phasing of cost between quarters. Is that correctly understood?
Yeah, so if we go to guide, and so yeah, we said in the report that in the fourth quarter our expectations are fairly modest since we're not expecting any significant project revenue for the fourth quarter. And then we have some cost elements and timing of certain costs that will go into Q4. Namely, we are moving offices both in Helsinki and Stockholm. So a little bit of more cost and not too high expectations for project revenue. So if you think about the second half in total, it's slightly weighted towards Q3.
Yeah, yeah
... this year.
But it is not, it's not investment that is going to continue, it's a little bit of normality that you have this by the holiday accruals.
Yeah
... and then a little bit of extraordinary cost that will hit Q4 and, and, and-
Yeah
... and not be repeated. Is that, how we should understand it?
Yes. Yes.
Perfect.
And at the same time, we are firmly sticking to our guide, and so no changes in that perspective.
Yeah.
Revenue to grow and EBITDA to improve from last year. All right, a few highlights about what's going on with Inderes. There's a lot of activity in the organization. There's a very good and positive momentum going on right now. A lot of things happening, a lot of changes, and the kind of like renewal of this company. I'm like sensing it all the time in a very positive way.
Mm.
Just a few lifts, like how it's appearing. This is not everything, but there's more and more experiments and new stuff coming out from Inderes that will help to serve the investors and our users as well. First of all, I'm actually really excited about the commissioned student coverage that we're launching. This is only in Finland. Let's see if it's successful, and we'll maybe roll it out in other countries as well. We're challenging the students that are interested in stocks to do analysis about ourselves.
The best team that we select will get to do analyst coverage on Inderes stock for one year to serve our owners and the investors, and we will pay EUR 10,000 for that team for the coverage service. So-
I guess with your history, it's not going to be the highest share price target that is going to win.
Definitely not!
Not, not.
We're really strict about this for the team, that they need to be..., and I'm not in the jury deciding on that.
No, no. I know, I know.
It needs to be a service for the owners, for the investors, and not for me or for the company. But yeah, from the student perspective, I think this is a fantastic opportunity for the students in this industry to get some recognition in the industry. It works as a trainee program to get a job at Inderes or at the industry in general. I think we have now commissioned research from SEB, which is great. This way we're gonna have a second analyst as well.
Yeah. Yeah, yeah.
Yeah, then...
Then my new colleague.
Sorry?
Then my new colleague, the robot.
Yeah, yeah. Your, your new colleague. You haven't met him yet?
Nope. No, no, no.
We'll arrange a meeting.
Good.
Robot, this is actually something we piloted five years ago, but I must say we were a bit early to do AI research five years ago with the robot writing kind of like basic earnings notes. But now the technology is so much more mature, and there's a lot of AI experience going on in the organization. This is one concrete outcome of that, so this robot is writing short earnings comments on how the company performed against the analyst expectations. And that pilot is live now online in Finland, and-
Yeah
... and soon we're experimenting and rolling it out in a larger way. As part of the AI experiments, one outcome is also the transcript feature of our webcasts. So, for example, today, the other webcast we had, we had live transcripts on the webcast. So we can do live transcripts, we can translate them in the future into multiple languages, and then the investors will have access to the full transcript of the earnings call afterwards, and this is all AI-generated. And this is one great example of how we can use technology to democratize financial information, to make these services available for all investors, like the transcript that used to be only available on these institutional terminals. And we can make them available for everyone for free.
Very much really excited about these pilots and new stuff that is coming out.
And then, as an analyst, I can say how much you use the transcripts and how good a tool it is to search around in, so yeah.
Yeah. Yeah.
That is going to be great to democratize that. That was one of our advantages as an analyst in the old days.
Yeah, yeah. Yeah, it's we, we're killing the advantages of analysts-
Yeah, the analysts.
... by making these like
Yeah. Yeah, yeah.
By making this available for everyone.
Yeah.
Sorry, sorry about that.
No, no, no, no. No, I'm on your side now.
Yeah, exactly.
I'm on the light side now.
Yeah
... not the dark side anymore. No, no.
But, I mean, I remember when I was an analyst, and yes, we had the privilege that when a company released its earnings, and the earnings event was in a hotel meeting room, and it was only me and
Yeah
... a few other analysts having exclusive access to the management. That was great for my job. And then came in these guys that brought in cameras and started to stream them for everyone.
Yeah.
I must say that many analysts were really pissed off with what we were doing. But then again, the companies were happy, the investors were happy, and the analysts need to find their competitive edge-
Edge
... in not getting exclusive information. They need to build their edge in how they process the information-
Process
... that is available for everyone, what kind of conclusions you made out of it? Yeah.
Yeah.
That's where this industry is going, and, of course, we want to make a good business out of it. These are the financial targets as a reminder. Regarding payout, today is the payday for our owners.
Yeah
... so the second installment of the dividends should be paid out now.
Yeah, it went off the 14th. Some people are sometimes confused about that, but the payday is today. Is that... That is correct, yeah. Yeah.
Yeah, so that's about it briefly.
That's about it.
Do we have any questions?
... even if it's your fourth, we still have a little bit, you need to hang a little bit around.
Right.
Can you elaborate on the types of IPO prospects you're seeing in Finland? You know, company size, industries, reasons, profitable, non-profitable, growth versus more stable companies. I know you can't say exactly what it is, but what are you seeing, the types of-
Mm
... of the one who are starting to plan that?
It's actually really mixed. It's big and small. We had Solar Foods, which is pre-revenue, and we have mature companies, we have different. So, I can't name one factor that would-
Oh
... would be the same for all. One interesting sign in the Finnish market is that we had Solar Foods doing a technical listing, so no offering in the IPO-
Yeah
... just a technical listing. There are some activity and some interest in at least the Finnish market to do more technical listings, so that the company raises capital as a private company-
Yeah
... gets the right amount of owners, and they, then they just do a technical listing. Which does have the benefit that you don't have the risk of the IPO failing because it's just a technical process.
Yeah.
So, let's see how that market... So that's one interesting factor. What we're seeing-
That could be interesting-
Yeah
... if that develops, right?
Yeah.
You know, you get a reasonable sized company on the market. They don't pick up money. You get valuated. You prove your life on the stock market for some time, you report, and then actually you're going out for maybe selling some of the shares or getting more money. But that could be very interesting because-
Yeah
... the IPO market is probably still tough, but this one could be an interesting development. I'm also... I don't know whether we will see it in Denmark, but very interesting.
Yeah.
How do you see the market competition in the Nordics? Recently, we have seen some consolidation. I'm of course talking in the Norwegian market primarily, with the Carnegie, DNB. But are you seeing any consolidations? Is that an advantage for you? I know you're not in Norway, so that might not make such a difference. So a little bit about the competitive situation and what you're seeing there.
We have competition in each and every single product lines. But then I'd like to maybe remind that, like, with a similar offering and a similar concept, there's no similar company as Inderes.
So it's still point solution, so you might say, I know it's a bad word, but,
Yeah, yeah, in a way. If we think long term, like 10, 20 years, this is a business that has strong network effects, and when you have strong network effects, the business tends to consolidate for those who understand and know how to play the network effects.
Yeah.
I mean, it's not a coincidence that we are such a strong market leader in Finland in almost all product areas because we've gotten the network effect to kicking.
Yeah.
So then when we go to Nordic level, yeah, long term, I believe it will consolidate into two, three, maybe strong players, especially when it comes to research. Because to be in this game long term, you need scale. You need to build your own technology platform, because otherwise you will be dependent on third-party distribution. So, and building that technology platform, which we are doing, requires a lot of technology capabilities and talent, but also money.
Money.
So that's a big investment, and you also need scale to build the community and distributor side of the platform. That's why I believe it will consolidate towards to a handful of player-
Yeah
... of course, of which Inderes will be one. Then if we think about consolidation in the investment banking sector, what's happening there-
Yeah
... and the banking sector. We are not in any way in investment banking business. So in that way, it's not relevant for us.
Right.
In one way, yes, investment banks, some of the investment banks also offer commissioned research, so there we do compete. In history, the bigger the investment bank or the bigger the bank, the less interested they have been in-
Yeah
... in providing commissioned research. That's at least what we've seen in history. Because-
Yeah. Yeah
... because what we do is mainly small caps. It's recurring revenue, it's small revenue streams, which is very different from running a transaction fee business-
ahh
a balance sheet business, so that's kind of like both have their role in the market, but I don't see that much competitive dynamics in that space. I believe there's a need for strong investment banks.
Yeah
in this ecosystem, and there's a need for independent, neutral information platform like us in the long run, and in some parts they will compete, but in the big picture, it's actually not that competitive what we have.
So you have the same feeling as me, as the banks get bigger, they lose less interest in the 10 companies they cover commission because they need to consolidate. They need now
ahh
... to get the cost programs out of their consolidation and so on. Yes.
Yeah.
Last question: What are your main winning points for the Swedish market? You know, as you said, you need to adapt a new model because it's more marketing-oriented than independent research-oriented. But so still in the early phase, if you should pinpoint some main winning points when you get the contracts in Sweden, what is that?
And you mean mainly research?
Yeah, research, yes.
Research.
Your main winning point on getting the research. Or we can also broaden it out and saying, is it that you actually now also winning the thoughts about, you know, the network?
Yeah.
The more you buy by us, the cheaper it gets and the easier it gets for you to operate your IR.
Yeah. Frankly and honestly, Finnish way, because we haven't won that much, we have not yet found the winning points.
Right.
Honestly, we need to work on the formula to win, to land new contracts. When we win and when we have won, I think it's the independence, the new type of doing research that many customers appreciate. It's the activity of the research, so we're going really deep into the company, and the research is active.
ahhh.
And then it's the distribution and the kind of like other content formats on top of the deep dive PDF reports.
Yeah, yeah.
We have other types of contents to build on top of that. But yeah, the big picture still is win the investors, win the trust of investors, which is where our team is also doing great work in Sweden as we speak. And if we win the investors, then winning the companies becomes easier. But yeah, we need to work on the go-to-market model all the time. And we will obviously find it at some point. I think it's a really interesting puzzle to solve this how to build the Inderes model into a new country.
[audio distortion].
That's what kind of like gets me and the team excited every time. Sometimes frustrated, mostly excited-
Mostly. Mostly.
Yeah. I mean, I'm just maybe I'm too frank about stuff.
No, I—
That's just.
... think that the numbers-
That's just how it goes.
... are saying that, you know, and I think you have been quite open about it since you got to Sweden.
Yeah
... that is going to be a time.
Yeah.
It takes time, so.
Yeah
... perfect.
We have the time. That's the strength of this company. This requires really long-term thinking, really long-term mindset. Even though we are a public listed company here presenting every quarter-
Mm
... I can honestly say that we, this organization is acting and thinking long term.
Let that be the last one. I don't have any more questions, so let that be the last one. Thank you for taking us through the result, Michael, and may everybody have a nice day.
Thank you, Michael.