Welcome to today's presentation, where we have the pleasure to present Inderes. As you can see on the front page, your half-year report fresh from the press today. That will be the subject and the achievements through the first half year and a little bit look into the future by your guidance. As always, we are joined by CEO Mikael Rautanen to take us through the presentation and answer questions in the end. For full disclosure, it should also be mentioned we have a partnership on technology and business, and you have ownership in HCA, so I think we get the disclaimer out of the way. As always, there is a box down below where you can ask questions, but I think I will hand the call over to you, Mikael. It looked like me like there are some acceleration.
Is that the Finnish economy who is getting better or is it you getting better? Maybe we will be wiser.
Yeah. Thanks, Michael. Good afternoon, everyone, on my behalf as well. I would take the credit to our team on good work and also good execution and the big investments we have been making in the previous years now starting to be more and more reflected in the growth numbers. We had a good Q2, 14% growth, and today we released also the July revenue report where the growth was 12%. So growth has continued also in July. So we are very happy with that one. Yes, the market conditions, there is some signs of recovery. Not much headwind anymore. I would say some IPOs coming in, not too many delistings. So it is getting better but one can not say it would be a booming market, and especially in the small cap First North sector, it is still a pretty weak market. But we are pushing forward nicely.
All the business areas grew in the first half. Especially we are happy with the software business. There we have said that one of the targets of this strategy period is to build the software business into the third pillar of Inderes, and we are making solid progress in terms of that strategic target. Profitability slightly improved from the previous year in terms of adjusted EBITA, and since we had no non-recurring items, the reported profit was significantly up. What I am excited about also is that we have been making a lot of investments into AI and turning into a more AI native organization. We are seeing good momentum there.
Tangible benefits for the business, better products for the customers, more efficient internal processes, people being excited and happy how these new tools are taking away the processes and tasks that are more manual and not that interesting for the talented experts that we employ. Overall good first half and especially second quarter. Going into the business lines. Research business revenue up by 7%. Happy to see that the commissioned research contract portfolio is back to growth. Also revenue grew by 7% margins at previous year's level. We are seeing really solid business in Finland, winning the newly listed companies at a really high hit rate, and at the same time churn being very low. Sweden revenues growing, and the losses are getting smaller there.
We have made some internal changes there and strengthened the autonomy of the local team, and that is moving also into the good direction even though it is not still contributing significantly to the growth numbers. Inderes platform; also the volumes are on a healthy level and increasing from last year. Events business revenue grew by 5%, margins somewhat below last year level. We had a really good first half the previous year, so this is fully in line with what we anticipated. Solid AGM season, solid Capital Markets Day season for the first half and of course the second half is more critical in terms of Capital Markets Day productions. Margins; the sales mix puts a bit of pressures on the margins because of higher subcontracting costs. In the events business, the remotely produced earnings calls, such as we are doing actually right now in this call.
This is a remotely produced earnings call. We are using our own webcams, and it is remotely produced. This is a business area that is at the lower price point, and it is becoming more and more software-based, and we are actually driving the transition into turning this into more and more software-based business. That is putting a bit of a pressure on the pricing of the product. At the same time, there is some price competition in the market, so that is putting a bit of a pressure on the revenue line, which is offset by the strategic goal that we have to grow into the larger responsibility event productions, where we are seeing good growth momentum also in Sweden. That is the strategic play that we have implemented successfully in Finland and now pushing the same transition in Sweden.
Does that mean you are a little bit more protected in Finland because there you have moved it to the higher level? Is it Sweden where you are seeing the pricing pressure because there is not that much? The question is it isolated to Sweden or are you also seeing some tendencies about the price pressure in Finland?
It is related to Sweden.
Yeah.
This Finnish business is on a really, really solid foundation and then there is the market difference between Finland and Sweden, that in Finland, companies tend to invest more into high-quality investor relations event productions.
Yeah.
While in Sweden, many companies are still doing audiocasts, audio-only earnings calls, which is quite simple production-wise and not that high price pressure. But there are some companies seeing that, hey, actually investor communications is also one area where we need to represent this company and the brand of the company in a professional way to a really critical stakeholder.
Yeah.
There are also companies that are like, "Yeah, this is an area where spending a couple of thousand euros more actually makes a lot of-
Sense
A lot of sense in terms of building the company brand and trust towards the critical stakeholders being owners and investors. Then software business, the star business of the first half, 23% growth and EBITA margin growing to 10% compared with breakeven on the first half of last year. Here we are, and we have said that we will invest in growth and international growth, and prioritize growth over profitability, but given the successes that we've had in sales, the profitability is also scaling or scaled nicely in the first half. Growth coming from all the product areas, also within the AGM business. So there we have been quite cautious on the growth outlook because of our really strong market position in Finland.
But despite that, we were able to grow still in this season the AGM business and we're seeing good traction for the fully digital general meetings after this spring. I would say it's only when this transition is happening. Some people are against it, but come on, general meetings have been the same for the past 100 years.
Yeah.
It's just a matter of time when it's going to change, and we're going to be driving that change. We delivered one of the biggest AGMs in the Nordics, fully virtual, very happy customer, and executed with no hiccups. That is opening up very interesting opportunities for our AGM business for the upcoming years because we believe the capabilities we have built in our software platform within this category are quite unique. So good development here. A bit more detailed, zooming into the numbers. Here's the full income statement of the first half. So 9% growth, recurring revenue up by 8%, and international revenue at 21% of revenue up by 7%. They're still not on a level where we want it to be, and at the same time, the business in Finland has been continuously outperforming our own expectations.
Cost level on a planned level, fixed costs pretty much flat year-on-year. No significant changes. What's affecting the profitability is the growth in materials and services, which comes from the larger event productions that come up with higher subcontracting costs and a bit different margin mix. The overall adjusted EBITA, EUR 11.4, compared with EUR 11.3 last year, and adjusted EPS at EUR 0.58 compared with EUR 0.55. Zooming into second quarter, which showed some acceleration. So revenue up 14%, recurring 9% up, and also we had a good growth in the project revenue in the second quarter, and in June we had good sales in the events business on the month that is usually quite slow. Here's also today's revenue report. We report our revenues monthly, so we also released today the revenue development in July, showing 12% growth compared to last year.
Events business being flat and research and software driving the growth. Balance sheet, not much surprises or exciting stories to tell about this one. We have a strong and solid balance sheet. Cash flow on a healthy level. Because of strong sales in June, we did increase the amount of receivables, which affected the cash flow for the first half report somewhat, but there's just a seasonality effect in terms of collecting the receivables that's having a slight negative impact on the cash flow. Guidance for this year remains unchanged, so revenue to increase from previous year level and relative profitability measured by EBITA margin, excluding non-recurring items, 10%-13%, compared with 11.4% last year. Still we're seeing slight growth in the market as background, and we will continue to make investments in the international growth and R&D, which is affecting the profitability.
One item to lift from the first half, for example, R&D spending, which we book directly to the income statement, so we don't activate R&D spending to the balance sheet. That was EUR 0.6 million and growth of 30% compared to last year. So one example of the investments we're putting. That's the first half in a nutshell. You want to throw in a few questions or-
Yeah, there's some questions. Is the margin levels software sustainable, or do you need to invest more there? You have invested a lot in the past, and now you're seeing the top line come and then also the margins, but do you increase investments again, or are this starting to be a sustainable margin in the software business?
As said in our strategy, we'll continue to grow the investments, which will affect profitability. In our strategy, we did say that we are seeking to scale the profitability towards the end of the strategy period, meaning towards 2029.
Yeah.
Short term, we are not looking to scale this to high margin levels because it is not yet mature business. But for the first half, it did develop better than we expected. But in a way, you can also think that that gives us better capability to accelerate the growth at the same time.
Yeah, sure.
Profitability is not yet the priority for this business line.
Do you have revenue from AI products, or is it primarily cost savings? I know it can be hard to make that distinction, but do you have AI products that you are directly selling and get revenue from, or is it more enhancement of current product portfolios that gives thickness and it is more on the cost-saving side that you see the AI effects?
We're embedding AI into our products and product portfolio with new features that make the products more rich, and thus increase our pricing power or open up new monetization opportunities for us, and that's going across all business areas. Then within our internal operations we're seeing concrete efficiencies, for example, within the research business, the number of companies one analyst can cover given the new tools, we're seeing that we can increase that number quite a bit. It's still early days. Software development is an area where the impact is something we're really seeing already how, with the same small software team how much you can get done.
You can get done. Yeah.
It's incredible. When we needed to grow, especially with software development, you don't need to be always just recruiting new team members to get new things done.
Finally, the revenue growth. Is there some timing in this or is there something we should be aware of that has moved into the first half versus the second half? Or if we look at the first half, is that a kind of underlying growth rate?
If you look at the July revenue report, you can see that there is no first half compared with second half timing effect because we did continue good growth also in July.
July.
We have had five consecutive months of good growth level. The recurring revenue grew by 9% in the second quarter. For me, those are signals that the growth is we still need to accelerate, but the growth is becoming more sustainable.
Sustainable. Perfect. I think that was that.
Yeah
from this part.
Very good. Then just quickly recap of the strategy zooming out to the big picture, past 10 years, how we're building the company. This is where we come from, and this is where we're building this company. The research business that we've built is a really solid business. Even though we haven't yet succeeded in getting that to a strong international growth path, it's a very strong and resilient and solid business. That's the foundation for Inderes and gives us the platform and the community. In 2020, we went into the events business, which has built into the second pillar of Inderes, especially in Finland, and now we have interesting opportunities within this niche market in Sweden.
The third pillar will be the software unit that we have ramped up from scratch during the past years, very much with the help of the proceeds we raised in the IPO. That has given us the capability to invest and build new businesses and we're on a good path to build that into the third pillar of Inderes. Given these three businesses, the growth opportunities we see in the market, and the business mix, we firmly believe that this combination enables us to reach the level of 30% revenue growth and profitability combination that we are aiming for. In terms of payout, here's a quick update on the payout for this year.
We've communicated that this year we intend to pay out EUR 1.7 million to the shareholders, divided into share buyback program of EUR 900,000, and a dividend of EUR 0.45 per share to be paid in two installments. After the first half, the status is that we have completed approximately half of the share buyback program. That's ongoing full speed, and we aim to complete it during the second half. We have paid out the first installment of the dividend, EUR 0.22, and the board is planning to pay out, that's going to be a separate decision, a dividend of EUR 0.23 in the second half of the year. To conclude, we're here to democratize financial information by connecting investors and listed companies.
Investors need to find accessible and trustworthy information on companies and stocks in this world of noise and AI-generated content, they need a trusted information source that Inderes is, and the listed companies, once they go public, they need to communicate to the markets, to their shareholders. They need to find the right investors for the company. We're here to help the listed companies to get the most out of being a publicly listed company, as we are ourselves. All right.
And then maybe if we should look a little bit at the guidance. You love this question as an analyst. You hate it as a CEO. Profitability mid-range going up. You still keep a bottom range on the profitability side. Is that to keep open for investments if you see that, or can you talk a little bit about the range on the profitability side, 10%-13% you are delivering, and then maybe with acceleration in Q2. But you still keep the bottom there. Is that to keep you open for investments, or is there anything else we should be aware of?
Yeah, to give a bit of a flexibility, that's one way to look at it. Then, of course, the project business, as we've seen in the previous years, it has been volatile and sometimes we've had negative surprises there in the second half because we don't have the In the first half, we have the AGM business, which is really predictable even though it's project-based. In the second half, we don't have the same visibility into the project business. Right now things are looking fairly good. Yes, the recurring base is growing. The markets are showing some signs of pickup and so forth. But that's mainly to buffer for the somewhat volatile and uncertain markets that we've seen in the previous years.
Previous. Then maybe finally, and now I just jump back to this one.
Yeah.
I guess you're seeing 23% software. Is it also the biggest opportunity market, meaning you are trying to grow a third pillar, but if you look a little bit into the future, is the software business more Is that going to be the biggest pillar maybe? That's what I'm asking. Both on market opportunity, TAM, scalability, that it can be global actually, and so on. So when you think about this area and what you have seen until now, could that be the biggest pillar in the future?
In terms of visible shareholder value creation opportunities, yes, software represents right now the most obvious value creation opportunity.
Yeah
Which is why that's the area where we are putting most investment, and which is why that has such a strong emphasis in the strategy.
Yeah. On the research business, we always return to it. AI, huge, huge, huge productivity gains on the research business. I should know. But it could also be a threat. Are you seeing any threats out there? Are you seeing anything new emerging, or is it still I kind of seen it, why hasn't AI hit job markets more? I think people try to explain with it by they have hit the young ones but not the old ones because you need someone to interpret AI and direct it in right direction, and then it goes.
Yeah
On the research business, is that also your viewpoint, that you still need the last human touch, the experienced analyst, but he will just be able to do much more, so you're not so afraid of someone suddenly coming in and starting creating from scratch analysis?
Yeah
A little bit about this area, I guess.
Well, we need to keep our finger on the pulse and not become arrogant.
Yeah
Also invest in transforming ourselves. But right now we're not seeing any of our customers looking for example, alternatives like, No, we don't need commissioned research because we have this AI something.
Yeah.
That we haven't seen any signs of. So the customers are still there. They're happy with our service. They're trusting our service. And at the same time from the and that's the listed companies. Then on the investor side, yes, investors are using more and more AI tools for their investment decisions. But the AI tools need reliable information, and that's what our analyst team is generating. They're generating vast amounts of information on the listed companies that will be then processed by the AI tools used by the investors. So there's still a maybe even increasing role for the analysts. Then what we believe in is also the analyst brands, the personal brands. We're growing a strong analyst and strong individual brands here at Inderes.
While some companies are going with the company or bank's logo first and then putting the analyst, just a small name in the small print, we're bringing the analyst to the front.
Front, yeah.
Of the play, which we think has been a success driver for us, and it will be so also in the future because it's still human-to-human communication. Investors, they seem to want to hear opinions and insights from people that they know, that they trust, that they're familiar with, that tell good stories and so forth. I think the human element is going to remain critical there. With the new tools that we have, we can get rid of the manual workflows and leave more time for that, and perhaps not as stressful earning seasons for the analysts as well. Not so long.
I think it's still stressful, but let's hope it gets better. Then on the last part, the monetization. You create a lot of content. You let the AI agent scrape yours because, hey, that also creates value to your customers that you are creating it for. Is there a monetization also potential on this content in the future? Any thoughts about that?
Yeah. We should be creative and open to build up new monetization streams also outside the IR budget of the listed companies. As we have done in Finland, we do have quite significant revenue streams also outside the listed company customer segment within the research business. We do have partners that are redistributing our research and that is, of course, a really high margin revenue.
Yeah.
To make that happen, it is of course possible because we have such an attractive offering for anyone who wants to offer information on Finnish-listed companies. New monetization opportunities are, of course, possible to emerge, and we need to keep the finger on the pulse there. At the same time, keep in mind our company mission, democratize financial information, make it available for all investors and all companies.
Yeah, that should also include the AI agents. No, I am joking. That should also include the non-human, the AI agents. No, I was just curious whether you have started to make some thoughts, because AI agents will not work unless they have-
Exactly
to consume training material, which you actually provide a lot of.
Yeah.
It was just to have some of your early thoughts on that potential revenue stream.
Yeah.
Perfect. I think we will leave it by then. I am just checking no more questions. Thank you to you, Mikael, for taking us through your results for the first half year and answering questions, and thank you for the audience listening in. May everybody have a nice day.
Thanks, Michael. See you next time.