Welcome to the Lemonsoft Q2 2025 results webcast. We will begin with the result presentation, followed up with a Q&A session. Please post your questions in the chat. Now, handing over to Lemonsoft CEO, Alpo Luostarinen. Please go ahead.
Thank you, and good afternoon, and welcome to Lemonsoft's Q2 report presentation. I'll be discussing our recent development and the results. We had an interesting Q2 with a lot of major transitions ongoing, both with our platform transition to Azure, as well as our organizational change negotiations, leading to a significant reduction in personnel. Our net sales grew 5.3%, and our gross margin remained fairly stable, a bit down from last year due to increased costs from the double costs with the platform, as well as increased costs after that. We've been working on optimizations on the platform, and we expect the costs of the platform to go down in the second half of the year. Our adjusted EBITDA was 16%.
We had all of the change negotiation-related costs booked on Q2, and from Q3 onwards, we should be seeing the cost savings effects from that, which are roughly €400,000 per quarter. Our headcount increased from last year, but in Q3, we will see the reductions, which are roughly 25 employees after Q2. Another main event we had, our Chief Commercial Officer, Tuomas Koivisto, stepped down, which we discussed already in the Q1 report. Looking at our development from a sales perspective, we had two quarters now declining net sales, which we are looking to transform or turn into a growth mode again at the end of the year. The revenue split remains fairly stable, but increased recurring revenue. Our revenue split is SaaS transactions and consulting. As for SaaS revenue, the share has grown somewhat in the past few quarters, and we'll be seeing that effect most probably continuing.
The transaction revenue has been going a bit down, mainly due to Finvoicer's transaction revenue and especially the invoice financing volume, which is cut a bit after the main customer loss in Q1, which we discussed already earlier. Consulting revenue is affected mainly by two different factors. First of which is Lemonsoft's consulting revenue reducing a bit after, and we've been doing packaging with our consulting revenue, packaging the implementations into SaaS revenue, which affects a bit, and other consulting revenue has been reducing a bit as well. Another part is the revenue from Finvoicer Continuous Services, which is coming a bit down. Significant operational changes during Q2. We've been doing the organizational changes, and that has had a major effect on our sales organization, which is being restructured, and we reduced the amount of our sales personnel somewhat.
We are working on rebuilding the sales management team in the next few quarters. We've been seeing higher volume in manufacturing and wholesale ERP deals, which is the sector that we focus on mainly. More than half of our revenue comes from manufacturing and wholesale. If you look at the past six quarters, so 2024 and 2025, we've been seeing the highest volume in Q2 in terms of manufacturing and wholesale deals, which is the direction, of course, where we want to go forward as well. Technology transition has been completed as for Azure migration, and the legacy data center has been written off. The post-migration issues that we've had are mostly resolved. Work is still ongoing, and we're optimizing the platform to ensure the cost efficiency as well. As for our subsidiaries, Spotilla and Applirent, which were acquired last year, have been continuing strong MRR growth.
We're talking about roughly 30+% growth, which is, of course, where we wanted to be. Several customer expansion cases have been ongoing between Spotilla, Applirent, and Lemonsoft. We are integrating Spotilla and Lemonsoft together, and then Applirent, we've been focusing on getting the invoice delivery combined with Lemonsoft's delivery partners. As for organizational restructuring, we finalized the negotiations at the end of May, and that reduced the headcount by 25 employees. Of course, our organization has been under heavy stress before and during summer, and that's something that we need to work on a lot with our employees to find a good and efficient way forward. We are also under individual key recruitment processes, especially the Chief Sales Officer for the whole group, which is a key part in our growth strategy.
As for our product development, following the platform transition, we've had slow development in our product roadmap, which is now resuming to previous speed. We've already seen or are seeing significant updates to Lemonsoft's ERP product already in the next few weeks. We are also developing new AI features, working with partners to develop a few pilots, and also ourselves working on bringing new features and functionalities to Lemonsoft to ease the use and make it more easy to use for our customers. As for capital efficiency, we completed a share repurchase as a reverse accelerated book building transaction, which is a fairly uncommon transaction type. We basically approached all of our largest shareholders and offered to buy our own shares up to roughly €8 million, and we were able to buy shares of the value of €2.5 million
We've also had a new share buyback program, and that is ongoing. Basically, all of our shareholders, the largest and the smallest ones, are able to sell shares if suitable in our share buyback programs. This is, of course, affecting our profit per share, earnings per share, as well as our profitability, our capital efficiency as well. Looking at our revenue figures in more detail, we have been seeing growth in our SaaS revenue at 10.4%, which includes, of course, Spotilla and Applirent from last year's acquisitions, and they are now organic from July onwards. Organic growth was a bit negative, to -2%, reflecting the consulting and transaction-based revenue especially. As for the recurring revenue, organic growth was also slightly below zero at -0.3%, which is affected mainly by the challenges in our transaction growth and the invoice financing volume.
Otherwise, the SaaS revenue is what we emphasize and what we need to be seeing growth in, and that is still where we want to be in the short run and that we want to accelerate going forward. Looking at our MRR , we ended up in Q1 at 22.4%, and we've seen new sales, which is not where we wanted to be, 1.1%, but still we've been able to close some deals, especially in manufacturing and wholesales discussed previously. Net downsell and upsell, due to the major transition period, has been slightly negative, and we expect that to turn to positive going forward. As for churn, we've seen some bankruptcies, some financial difficulties with our customers, which is a very, very difficult situation still, and we would expect the market situation to improve, but no major signs yet that there would be a drastic change to positive.
Otherwise, as for our own churn, the next quarter, as we can see, typically a few months forward, seems to be smaller than previously. We ended up at 22.2%, which is basically flat from last quarter. As for the cost base, the gross margin decreased slightly, and that was mainly due to platform costs and the platform transition. We basically have been increasing the power of our platform, and we are bringing that down as much as possible as we move along. That has been already ongoing in July, August, and going forward in September and the fall. Personnel reductions were completed in Q2, so that will begin contributing to profitability in Q3 and Q4 already in full effect. There were some non-recurring costs, especially the termination periods of the personnel, which have been booked on Q2.
As for the cash flow, we've had a very positive cash flow in Q2, and that has been due to sales, receivables, as well as financing receivables. We've had basically a €1 million positive return on that end. The personnel change negotiations have now been finalized, and we are looking to stabilize the situation and now build on where we are. We've been looking to make some individual recruitments and basically looking at the organization to see where we are after the reductions and if there's any special situations that need to be taken care of and need to be added some resources. Otherwise, we are in a good situation right now. Q2 personnel figure is, of course, a bit up from the actual situation at the end of June, and July onwards, we'll see some reduction in that figure. Otherwise, the personnel by function is pretty much as before.
We'll be reporting our Q3 figures later on this year in October and then moving to next year and the full year report. As usual, you can see all of our information and the webcast and the reports on our website. Now we can move on to questions.
Thank you, Alpo. The first question from Daniel Lepistö at Danske Bank. How much were the direct costs related to the concluded change negotiations, and were these costs impacting the Q2 figures? Follow-up, are you treating these costs as items affecting comparability?
No, we are not treating these costs as items affecting comparability if we're talking about adjusted EBITDA. Adjusted EBITDA is only adjusted by the acquisition-related costs. As for the costs that were affected by change negotiation, that number, I actually don't have the exact figure right now, but that number is fairly limited.
Okay, then Atte Riikola from Inderes. After major changes in the organization, what is the overall feeling of employees? Have you seen unexpected attrition?
We've seen some unexpected attrition, and we are looking to work extensively with our employees to understand the feelings. Of course, there are some negative feelings going on. Otherwise, we've been all of our key employees that are working on our product and our sales right now, and the customer base, we want to treat as well as possible, and we'll be working with them in the next few months. We actually arranged a whole company meeting in June, which was a positive event, and we've been looking to take all the feedback from our employees. We'll be continuing that work actually tomorrow with the full company meeting.
Okay, transaction revenues were in decline. Do you expect a similar negative trend to continue in the coming quarters?
If you look at the invoice financing volume, that decline has been sort of a continuous volume level that we have right now. That will cause a negative trend if you compare it to last year's figures. That will have some effect, but otherwise, no drastic decline in transaction revenue.
Further from Atte Riikola: Azure migration has caused problems in some customers. Has this resulted in customer churn, or have you had to give discounts to these customers?
We actually haven't seen significant churn, and we've seen very limited churn related to the Azure transition. We've had customers experiencing difficulties, and that's, of course, something that we want to take very seriously. We put a lot of effort into fixing all of the issues and taking care of our customers. In July, we've done a lot of work, and in August, we'll be finalizing that we get the issues fixed. We'll be working on discussing with our customers about any potential further questions and looking to grow together from there onwards. Very limited churn and actually very limited discounts as well.
Okay, your cash flow was strong in Q2. Was there something special related to that?
Yes, I mentioned before there was a good return on sales and receivables, as well as invoice financing receivables. That's been a positive take on the cash flow, otherwise, nothing drastic.
All right, then are you more actively exploring new acquisitions now that the biggest changes in the organization and technology platform are behind?
We've been discussing with potential acquisition targets all along, as we typically do. Of course, in the first half, we've been more hesitant in engaging in further discussions. After the summer, we've seen some uptick in the activity, and that's a very positive sign, of course. We want to continue closing acquisitions in the next few years as before, and I wouldn't be surprised if we would finalize another acquisition in the next few quarters.
All right, are you planning to update your financial targets at some point?
Yes, we are during this fall.
All right, that was the last question, so back to you for closing comments.
All right, that's a brief, very brief update on Q2, and we'll be looking to take our business forward in Q3 and Q4. We should be in a very different position as we've been in the past six months. Thanks a lot for watching, and we'll come back in the report in October.