Good morning and welcome to BTS Group Q2 Report 2025. During the question Q&A, you can press the pound key five on your telephone keypad to ask a question. You can also write your question directly in the webcast. With no further ado, I hand the conference over to the CEO, Jessica Skon.
Perfect, thank you. Hello, dear investors, thank you for joining. For those of you I'll see later today, I'm looking forward to the time with you. Let's talk about Q2 2025. No doubt, it was absolutely defined by a big problem, right? EBITDA dropped 23% in the second quarter. If you unpack that, you will see that is due to one issue. That is the operations of BTS North America. Within BTS North America's profit performance, we lost about SEK 36.3 million in the second quarter. Half of that was due to one-time expenses of severance and legal fees associated with the Sounding Board acquisition and also part of the drop in unfavorable U.S. dollar exchange rate. The other drop was 100% because of the decline in revenue in North America. What's been done? In early June, actually, we did a reorg.
We have a new management team in place in BTS North America. I've gained six new direct reports as a result of that, and about our top 30 partners in the company have switched who they're reporting to. We'll talk more about that in just a minute. Q2 was also defined by something else. We set out this year to get back to double-digit growth. I'm very proud to say that two out of our three units are successfully back to double-digit growth: BTS Europe and BTS Other Markets. Let's go through each one of the markets now in more depth. BTS North America had - 4% revenue growth in the second quarter. Our new growth strategy has been fully implemented. Our view on the main reason for the - 4% growth is inefficient sales operations.
It is true that Trump had an impact on tariffs from early April in the second quarter. It is true that some of our customers went into delays, conservatism. They froze. One of our largest company clients stopped all work, did a 17% reduction in force, and that obviously hurt the team. When we looked back at the second quarter, approximately 12% of the quarter's revenues were pushed out. Over half of that was in the last seven weeks of the quarter. That is true. On the other hand, it's been three years of unexpected black swan events, and we think the team can do better. Our success in most of the world and Europe shows us that it's an internal issue. We implemented the new team. The new growth strategy is completely implemented.
It's starting to go through the company, and I have to tell you, there is a lot of energy. We have more full-time sellers in the market. We have more time spent with our customers. We've slowed down anything that's not customer or stopped non-customer-facing time. We're prioritizing our core clients, the clients that spend the majority with BTS and where we have the highest win rates. We are putting our AI offering in every single proposal. Not 10%, not 20%, not 30%. 100% of our proposals right now have our AI technology and our AI services embedded. We expect to return to growth in the first half of 2026 as we implement these changes, as they gain traction and momentum, and as we see our win rates coming back to the clip that we're used to.
If we jump to BTS Europe, which was a very tough market in the first half of the year, we're super proud of our 31% revenue growth in the second quarter in BTS Europe. I'll remind you all what's behind this. For big competitive global deals coming out of Europe, a team has over a 60% win rate, which is double that of the rest of the company. Despite the fact that the market remained sluggish, the second quarter was fantastic for them. We did start to see, towards the end of the second quarter, more sluggish and delays in some of their decision-making, but an absolutely fantastic quarter for Team Europe. We still managed to win large contracts. Of course, similar to North America and across the whole company, we continue to push on early pipeline generation and strengthening our revenue growth culture.
BTS Other Markets, second quarter, back to double-digit growth at 19%. Demand has been strong in most of our regions across Other Markets. Southern Europe, which is part of Other Markets, has started to recover slowly, which is good news. More financial services from an industry perspective, we've had a lot of win rates in that sector in the second quarter. Investments in the Middle East and our African operations have been paying off in terms of delivering high growth. Besides looking at BTS Europe and BTS Other Markets to show us that double-digit growth in a more difficult market is possible, we can also look at our services. The executive coaching shows us that double-digit EBITDA growth is also possible. Our coaching business's profit grew 34% in the second quarter. Their win rates are extraordinarily high. They're experiencing the highest renewal rates in their 12-year history.
The combination of the value proposition for the CEO and the executive team, combined with the new technology we acquired from Sounding Board, is a winning value proposition. In fact, we purchased Sounding Board in March, and it's off to a very strong start. In terms of statistics from that, the team has won 11 new clients in all three of our geographical markets since the end of March. Three of their accounts have expanded. I want to call out one particular competitive win because this maps to the vision of why we acquired Sounding Board. We wanted to be chosen as the global coaching provider of choice. You could coach all leaders, from the CEO to the frontline, and our clients can also use the technology platform for their own internal coaching and mentoring needs.
We won a very large biotech Nordic company that's in 70 countries, and we just won as coaching provider of choice. We're very proud of that. If you look at just a snapshot of the units, you can see here what I've already been saying in terms of the growth and the EBITDA performance. The bottom line is strong organic growth in two out of the three markets. BTS Europe's margin is a particularly nice bump from 11.3% - 14.4%. Business mix was favorable. They were able to execute it with less external contractors, hence the margin. In BTS Other Markets, we saw the demand picking up in most of the markets. APG, which is a very small unit in BTS North America, acts as a reseller of some of our products, not all of them, and really was hit by the overall kind of malaise in the U.S.
market in the second quarter. Their customers reduced project scopes. They tried to do things in-house and/or they delayed. Let's talk about AI in terms of keeping BTS Group competitive in the market and our AI adoption services, and then we'll look at our gains in terms of productivity and productivity going forward. I think this is an enormous opportunity for us. I am deeply energized by our advancements, by the success of the Wonderway acquisition in the first 12 months, the creativity and the tinkering that I'm seeing across 24 countries, and the win rates as a result of embedding AI in all of our proposals. I'll just take a step back for a second. From a market opportunity, I think it's huge. There are always going to be consulting firms that are going to implement big company tech. That's not BTS Group, right?
There are going to be other firms that are going to recommend a change in business model. We are the only firm who's going to reflect their new strategy, their AI strategy, right? The new talent model in an organization that's happening because of the use of the new AI tools. We can reflect the new ways of working, and we can make it deeply personal, which is the core value proposition of BTS Group for the last 40 years. We have clients asking us now to be their, what they said is their, Accenture in terms of implementing their own look at how to create AI-based tools and simulations and drive adoption across the organization. It is a very exciting time for us. To meet that market demand, we're doing a few things.
First of all, in the first bullet here, you'll see the revenue associated with our AI adoption services. Training on the AI tools. Next step, maturity, getting adoption by business unit or function team after team. Our revenue growth here has grown 425% versus the same period last year. We have $8 million in bookings. It is absolutely just the beginning. We are also launching three new core services to help our clients further adopt and get the lift from the AI tools that they want their teams to use. The other way to look at this is our own AI platforms and the subscription revenue that we are getting from them. In the first 12 months of this offering, we're at $3 million in bookings, and we've had 100% growth from Q1 and Q2.
The really interesting thing about the Wonderway AI conversational bot is that we're sticking it in our simulations for big sales kickoffs and large offsites and simulations. The usage of that inside the simulation is driving scaled adoption and self-service subscription models on the platform. The subscription offer was launched in May. Fast growth here right now, big market potential, and a lot of energy internally in the firm on the tools that we have. If you think about AI in terms of our productivity improvements, we've been doing quite a lot of things and quite proud of this. We can look at it both from the AI impact and our other automation initiatives impact. The bottom line here is we announced our phase one, which was $5 million in employee savings, which mainly hit in the second quarter in terms of the severance costs.
We'll start to see the lift from that already in Q3, Q4, and obviously next year. Overall, in the first half of the year, you'll see a 7% decline in the total number of core BTS employees. Obviously, the acquisitions have added people on top of that. We are on track with our phase one, $5 million in savings. We see further AI adoption, not just within our consulting teams, but across the operational functions at a clip that we have not seen previously, which we all find very exciting. We can see in the workflows of the operational functions, the prompts and the GPTs that they're custom building to improve the efficiency of every step along the way.
Our simulation team continues to experiment on different vibe coding platforms that have very strategic potential for us in terms of how quickly, how large our teams would be in developing those and value for the clients. In terms of automation, we have one major initiative. One of the reasons we bought Sounding Board is to migrate BTS's coaching clients onto their technology with their operational teams. That is one quarter delay, but on track where we expect the majority of the impact to impact us in 2026 and a little bit in 2027. Q2 was tough, and it was tough for one reason, which was North America. Our competitiveness remains strong. The market is enormous and growing from my perspective. I'm very proud of our fast AI advancements. The team is energized, and we're starting to see the win rates and the pipeline pick up again in North America.
You have come to appreciate BTS as a story of long-term profitable growth year after year. I think you can expect that of us moving forward. We're proud of our historical performance, and I'm excited about the opportunities that AI is going to have for us both internally and externally over the next three to five years. We'll continue to have a stable and growing dividend that you've also come to expect. Of course, given the poor Q2 performance, we changed our outlook. It's been lowered. The result is expected to be worse than in 2024. Looking forward to answering your questions. Do you want to start with some written ones?
Yeah. Hello and good morning. Michael Wallin here, Head of Investor Relations. While we're waiting for calls or questions from the conference call, we'll take some sent by email, and we have a few here. The first one is rather long, and it deals with the outlook for 2025. Elaborate more on how you reason around the outlook for 2025. Adjusted EBITDA for the one-off costs of $14 million in the first half is around $158 million in the first half, only slightly lower than $169 million for the first half of 2024. How big cost savings are coming in during the second half of this year, and the U.S. is meeting more easy comps. Is it reasonable then to assume that adjusted EBITDA for 2025 can meet the same levels as in 2024?
We've given our outlook, but maybe we can talk a little bit about what the outlook is based around.
I think if I'm understanding the question, they're wondering if it's going to be better than what we're saying. Is that what they're saying?
Yeah.
What's the chance of it being the same as last year, even though we just believe it's going to be worse?
Yeah.
My job is to be as accurate as possible in the moment and not have to have swings that are unexpected on a regular basis. Obviously, we're fighting with everything we have to make up for the drop in the second quarter, right? To get North America back to a healthy growth clip. I took over North America in 2016 after they had five years of very low single-digit growth and profit decline. In that moment, it took me three quarters to turn it around and get it back to double-digit growth quarter over quarter for the next three years. I am confident that we will do it. What we are mentioning is we think that will be in the first half, right? North America is a big company.
If they can't get back to a double-digit growth clip in Q3 and Q4, yes, we have the cost savings starting to come out due to the severance in the second quarter. Our estimate right now is as accurate as it can be.
Thank you. That question was from Alexander, and he has a couple more questions. The second one is relating to cost savings. Is any of the cost savings of $5 million seen in Q2, or will the first effects be seen in Q3?
Correct.
Yeah, elaborate on how large cost savings will be in Q3 and Q4 to understand momentum in the cost savings program going forward.
Yeah. Most, I would say, 70% - 80% of the $5 million in cost savings were taken out in the second quarter, and then we paid the severance against that. We have a few more coming expected in the third quarter. You will start to see a revenue per consultant improvement in the third quarter, both in North America and in most of the world. It will continue in the fourth quarter. Obviously, the first two quarters of all of next year will be running on a full-year healthier clip against that full amount, right? It's pretty easy to do the math of what percentage would then hit in Q3 and Q4. I would also say that most of the world had bigger hiring plans given their high growth, and they've cut those way down back in March or April.
You'll also see a nice lift in revenue per head in their market as well due to the AI productivity gains.
Thank you. The third question from Alexander is buybacks. The management and Board view their view on a potential buyback program with current valuation, I guess.
We haven't discussed that in depth. I think we believe it's a good opportunity to invest, so we haven't discussed it in depth.
Yeah. The second question is from Daniel Thorsen at ABG. There seems to be a problem with the dial-in function. The first question here, should we expect more one-off costs in North America in Q3, Q4, or are these charges and organization changes behind?
Yeah, they're 80% behind us, so there'll be a little bit more, but it'll be small.
Yeah, second question, the guidance on lower EBITDA this year is reported EBITDA, I assume, which is affected by some $20 million one-offs so far this year. Is it possible to see a more flattish adjusted EBITDA versus 2024, or do you expect EBITDA adjusted for the one-offs to be lower than last year as well?
Once we take out the one-offs and the currency impact, what is core EBITDA doing? Is that the question?
I assume that's the question.
Yes, it's slightly lower than last year. It obviously depends on the strength of Q3 and Q4.
Third and final question from Daniel is, thanks for sharing the AI KPIs and growth progress. Looks promising. Do you see regional differences in demand or order bookings of these numbers? Is it mainly driven by the U.S. or is Europe also showing good demand?
Yeah, what's so cool, thank you for the question, and a lot of the AI tech subscription revenue is coming from the Wonderway acquisition, which we did 12 months ago. That acquisition is the most global integration we've ever done. Within the first three months, we had deals in Europe, other markets, and North America. If you fast forward now 12 months into the integration, North America revenue is the biggest, but Europe has just as many deals or slightly less, like let's say 40% of the deals are in Europe and a few in most of the world, and then North America has the revenue. It's competitive in all the markets, and it's particularly competitive integrated in with the other things that we're doing.
Thank you. A question from Johan: Have you lost revenues to competitors in the U.S., or is the slower growth rate mainly due to not being able to convince your customers to acquire your services?
Yeah, I mean, honestly, it's been the slower growth. It's customers saying, we're nervous on spending, we're going to try to do something in-house, or we're going to wait. I will say that we've started to see some movement, right, in the third quarter compared to the second quarter, which feels good, but we need a lot of movement to make up for what happened in the second quarter. That's our goal. Yeah, the win rates, Europe's the one who had the 60% win rates for a percentage of the deals. The person who led that effort in Europe is now running all of our practices. What was behind the success in Europe was that there was AI and AI innovations in every proposal. Plus, there was a really good high practice discipline, and the clients could see our culture more easily and so forth.
His practices are being adopted very, very quickly in the U.S., and we've already had our first wins based on that approach, which is, you know, pumping up the team. Yeah, it was more market delay than us losing to competitors.
Sorry, that was from Yoon. We have a question from Johan. AI-related revenue seems to be roughly 8% of your total revenue in the first half. Are margins from AI-related services above group margins?
Sorry, the second half of the question?
Yeah, are margins from AI-related services above group margins?
Oh, that's a great question. Certainly, the subscription portion of that is. I would say the margins on the training-related AI services and the more consulting is more in line with the company average.
Good. A question from Adam. This is in Swedish. I'll translate it quickly here. Are your forecasts for the full year based on reported results or adjusted results? You had some one-offs in your first quarter, even if we didn't say how big they were.
We're including all the one-offs as part of the total earnings. We're not saying all the one-offs go over here and live there, and I'm just going to talk about the core EBITDA outside of that.
Yeah. Some questions from Jonny. Can you elaborate on the market in North America, especially tying that you comment regarding some movements in July? How should we think about the outlook in the second half in North America?
Yeah, I mean, we put in place the new team or the shifts in the team in early June. I had an offsite with those leaders the third week in June, and things have been moving, right? The new ways of working, kind of week to week, new disciplines, preparing and practicing for wins, putting AI in all of that. I think it's, you know, rebuilding that enough momentum in early pipeline to have double-digit growth on that size is what we're doing right now, right? We're making sure we take share, and we're winning on every deal, and we just need the early funnel volume up. The team is doing the right moves, and we're seeing the right energy, and clients are reacting to the reach-outs. They want to meet now. They want to move. We're not hearing, "I can't talk right now. Things are too uneasy," right?
All of those are good signs. I expect, you know, the third quarter to be better than the second quarter, but still far away from a double-digit growth target in revenue that we're aiming for. It should be a build, right, moving into next year.
Thank you. He had a couple of other questions. Elaborate on your comment on North America coming back to growth in the first half of 2026. Are you expecting the market to improve in that, or is it more internal measures in your own hands?
Yeah, yeah, yeah.
Can we expect organic growth already in the first quarter and an acceleration in Q2 next year?
Yeah, the first quarter's success depends on what we're doing right now for the next eight weeks. It's that simple. A large percentage of North America's Q1 revenues have to do with supporting our clients' top 50 meetings, top 100 strategy kickoff meetings, sales kickoff meetings for 45,000 sellers. That's what typically builds up North America's Q1 success base. Our clients get used to us being that type of partner for them because we put on unbelievably unforgettable experiences for people and get them excited and have clarity on the strategy. That is the push right now for us in North America. The interesting thing is just two weeks ago, one of our consultants on the West Coast called me. He's like, "Jess, three of my previous clients just called and asked me if we could do their sales kickoffs between October and February next year." That was not solicited.
That makes us happy. That's like some movement coming that they're ready to move. We are hearing from many clients that pulling people back together in person again, so in real life, they need it. They need it for culture strengthening, culture building. We're putting the AI tech in the in-real-life experiences. Honestly, the Q1 narrative, when I talk to you again about Q1, is going to be 100% correlated to those amount of deals and that success. I'll know a lot more about that in the coming six or seven weeks.
Yes, I got a message here now that a telephone conference might be working now. Please try if you have any questions you want to put in by call. Meanwhile, I'll take the last question from Jonny here. Europe and other markets seem to be strong momentum in Q2. What is driving this, would you say, and has this momentum continued so far in the second half?
Europe's momentum in particular is they've had six or seven quarters of 60% win rates on large, big global competitive deals. Some of the world's biggest companies headquartered in Europe are saying we want to completely rethink how we do training, how we do leadership development, how we implement change. In those competitive bids, they have a 62% win rate, which is extraordinary. Our company average is 30%. Six or seven quarters of that clip and that kind of high-performance teaming and win rates is what's behind their first half comeback compared to the year before. We just won another really, really large seven different levels of leader development just a few weeks ago. We were all celebrating that as well. For Europe, if we look forward into the second half, they've had really high growth, right?
We believe that Europe will end the year with double-digit growth, and we believe the growth is going to slow a bit in the second half, but still be positive in the third quarter.
Do you want to try with a conference call if we have any?
I can comment on BTS Other Markets. The only thing different from last quarter is that Southern Europe, particularly Spain, is starting to show signs of a comeback. Both the Netmind acquisition company from a few years ago has done a turnaround and is doing better, and the core business as well, which is great. The Middle East continues to be strong. The Singapore team continues to do well. There's a lot of energy in Brazil with the Nexo acquisition. This has been the first few months of them coming together, and each team's value proposition is really clear. That seems to be fueling them with energy at this moment in time.
Yeah, we've got another question here. What was the win rate in North America in Q2, and what has been the company average for North America historically?
Yep, so Q1, it dropped. Q1's win rates went down to 27%, if I remember correctly. Q2 win rates went back up to 34%, which is really good. They're deal desk, so there's the typical win rates of all the sellers in the market, and then there's something we call deal desk, which is these like giant RFPs that come in that aren't part of their new logo RFPs. Those deal desk win rates in the first quarter had dropped to 22% compared to Europe's 60-something percent. That's why we took the partner in charge of this, and they're working with the partner in charge of this over here, and we're quickly, quickly adopting the same practices. We can already see the deal desk win rates under these new practices coming up dramatically.
I think we have the right approach there to fix it, and that explains part of the problem. I will say this, there's something important. Some of those non-win rates are customers who took back the deal. They're not all saying we lost to a competitor, but it means the deal went dead because the client just canceled it or decided not to move forward or something like that.
All right, no more written questions for the moment. Were there any calls on the conference?
Should I give you one? Look to see if Dan has any questions. Please go ahead, Johan. Your line is open.
Thank you for taking my question. I think we covered a few of those that we were discussing here, but I'm a little bit curious to hear your thoughts about what's happening in the pharmaceutical industry. There's been quite a lot of turmoil in that industry in the last few weeks with regards to tariffs and caps on drug prices. Has that had any impact on your client discussions? That's a quite important part of the North American business as of now.
Agree, it's an important part of the business. No, we have not experienced anything yet. To the contrary, I think we announced in the last quarter meeting we won a really big deal with Bristol-Myers Squibb. The coaching part of the business, one, it's about $1.9 million a year for the next three years. The non-coaching business side, one, about $3.2 million a year for the next three years. The buyers there are trying to talk to us about increasing scale and budget. That's just one example. No, I don't have any examples right now of shifts in demand for our services there, but I will keep you posted.
Excellent. The other questions we had were more related to if you can kind of bridge the kind of EBITDA development on an adjusted basis for the North American business in Q3 with regards to drops in utilization versus the kind of potential for cost savings.
Yes, for sure, some of the core salary cost savings are going to start to come out right in Q3 and help the North America business there. There's a few more seniors, there's a few more, you know, there'll be a little bit more severance that hits in the third quarter. The real lift I think we'll start to experience in terms of North America's profit is going to be in the fourth quarter.
If you adjust for the severance, looking at the adjusted basis, it's still a big lift coming in Q4.
Yeah.
Great, I get back in there. Thanks a lot.
Sure.
The next question is from Jonny Jin from SEB . If he has any follow-ups on his written questions, please go ahead, John.
Hi, I have some physical issues before, so I asked my questions on the chapter, but I can have a quick one as well regarding the, you said some deals have been hesitation among some deals and they've been pushed out. Did you mention that there were any cancellations or did you see them coming in H2? My line was a little bit unclear there.
No, I don't think I did. Thank you for the follow-up question. Yeah, some of the deals that were pushed are hitting in the third quarter, which is great. We really didn't have any that were full-out canceled. It was more like a not now, let's wait and see, let's talk again in a couple of months. I think one of the most material things that happened is one of our largest clients in the energy sector, the CEO, announced a hold on everybody and said, we don't know who's going to stay or who's going to go. It took them six or seven weeks to then clarify. I think 17% of the organization was let go. The BTS team had, I think, eight different active proposals and played with different buyers across the company. Of course, all of those were frozen, right?
Not only was the revenue stopped, but the deal flow was also frozen. The interesting thing is the team spent a week there about three weeks ago, and many of those ideas are kind of back in the works. They're not ready to close tomorrow, but they're not dead, right? Now that the dust has settled in the organization, there's more movement and, you know, there's more movement forward. It's just an example of one of the rougher parts of the North American business in the second quarter.
Thank you for that clarification. Just the one final, I think you mentioned that Europe and other markets were strong in the team. It sounds like the momentum has continued here in the second half of the year. Is this also true for other markets, or did you only say that for Europe?
Just to clarify a bit, BTS Other Markets, I expect the momentum to continue. BTS Europe, I expect to slow down. A 33% clip is really high. We think they're still going to grow, but it will be slower growth.
Thank you. That was awesome. Thank you so much.
Sure.
There are no more questions now from the telco, so I hand the word back to you, Jessica.
Okay, super. Are we done on our side?
Yeah, no more written questions.
Great. Thank you, everybody. Appreciate the time and look forward to seeing some of you later today.
Thank you.