Welcome to the Dustin Q2 presentation for 2026. During the questions and answers session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the CEO, Samuel Skott, and CFO Julia Lagerqvist. Please go ahead.
Good morning, everyone, and a warm welcome to the presentation of our second quarter results. My name is Samuel Skott. I'm the Group CEO here at Dustin, and with me today I have our CFO, Julia Lagerqvist. If we get into the Q2 report, I'm glad to report yet another quarter with organic growth, strong cash flow, and reduced leverage while we continue to streamline and improve the efficiency of our operations. Net sales development was positive in the quarter with organic growth of 4.4%. Growth was driven by a strong performance in the public sector and should partly be seen in the light of a strong comparable quarter. The gross margin decreased to 13.2%, compared with 13.9% last year, but indicated a sequential improvement compared to the first quarter's margin of 13.1%.
The lower margin is mainly explained by mix effects arising from strong public sector growth and continued price pressure in the Netherlands, also a weak performance within non-standard services that had a negative impact. Adjusted EBITDA was relatively stable at SEK 103 million, compared to SEK 110 million a year earlier, where implemented efficiency measures nearly compensated for a lower gross profit. Cash flow from operating activities increased to SEK 258 million, compared to SEK 180 million last year, and this is primarily driven by improved net working capital. Leverage measured as net debt to EBITDA dropped to 2.7x, compared to 5.7x last year and is now within our target range of 2x-3x. If we then turn to some operational highlights for the quarter.
We have taken important steps to further sharpen our business, and the discontinuation of the consumer offering is now completed in all markets, which means that we are now fully focused on our business customers. We have also initiated a new sales organization dividing relation sales between the Nordics and Benelux. By appointing a responsible for relation sales in Benelux, we get more attention and come closer to the customers in the Netherlands, the country where we've had the biggest challenge during the past years. This new organization will also create a stronger local focus in both our regions, with better ability to capture local opportunities. To support our continued transformation within services and in the company in general, we have appointed a CTO with a clear mandate to drive both transformation and efficiency improvements.
We have also been re-awarded EcoVadis Platinum rating, which further strengthens our position with our customers that have high demands on sustainability. Following weak performance and to accelerate our transformation, we have executed cost saving initiatives within non-standard services to better align the cost base with lower volumes, with savings materializing from the third quarter. With this, I hand over to our CFO, Julia Lagerqvist, to give you some more details on our financials.
Thank you, Samuel. Moving then to page four, we look at our top line development. As Samuel just presented, we saw 4% organic growth in the quarter. I will now break this down somewhat. If you remember, we talked last time about how we in the last year shifted sales from Q1 to Q2. This related to the implementation of the new ERP system in Benelux, which led to delayed invoicing. This effect corresponds to around 6 percentage points in growth headwind in Q2. As we have said, we have fully exited our B2C business this quarter, and that drove roughly 2% decline in total sales. That explains most of the negative impact coming from the decline in the SMB segment. On the opposite, we saw strong underlying growth in LCP, mainly related to the public sector and driven by two factors.
One, the continued upgrade in the wake of the Windows 11 shift, and two, we saw some custom orders that were brought forward to mitigate expected price increases or more limited availability related to the global component shortage. All in all, this explains the 4% organic growth in the quarter. We now move to page five to look more closely at LCP segment. The sales in LCP was SEK 4.1 billion in the quarter, or 5% higher than last year. The organic growth was 10%, so we continued to see a large negative forex impact from the strengthened SEK in the quarter. This growth was then on top of a strong Q last year, as just explained. The growth was mainly driven then by the demand in public sector and related mainly to continued PC upgrades and customer orders brought forward.
From a geographic perspective, we saw strong growth in Sweden, Norway, and Belgium. We also saw positive development in our lifecycle services where strong offering have contributed to new contracts as a security partner in Norway and the Swedish municipality region Kalmar. I said before, we can see large volatility in sales between quarters in LCP. The gross margin decreased versus previous year, but did improve a little bit versus previous quarter. The growing public business contributed to a negative customer mix effect with larger share of public customers that normally has lower average margins. In addition, the continued price pressure in Netherlands was a key driver for lower margins. The increase in takeback had a positive impact on both margin and EBITDA, and we also saw some positive development in our private label business versus last year.
We also saw continued improvement in our cost structure, mainly thanks to the restructuring programs. This had a positive effect on the bottom line. Overall, this led to a segment result of SEK 105 million versus SEK 99 million last year, and also improvement versus Q1 result. The segment margin ended at 2.5% in line with last year. We move to the overview of the SMB segment on page six, where sales landed at SEK 1.3 billion or 14% below last year. Also here we saw negative forex effect, and excluding this, the decline was 11%. We see some signs of stabilization, but customer remained cautious due to the ongoing economic uncertainty. We, in the quarter, exited the B2C business in all our markets, which explains more than half of the decline for the SMB segment. Excluding this effect, the organic sales decline was just above 4%.
As explained earlier, this is a strategic move to better focus on our core business, but we always expected some sales headwind coming from this. Looking at the product mix, we saw that the share of software and services sales increased to 13.3% versus 11.6% last year, which was more an effect of declining overall sales than an uptick in software and services. We saw continued decline in our non-standard services as in previous quarters. The gross margin was stable versus previous year. We saw positive improvement in our base hardware business in both Nordics and Benelux, thanks to continued price discipline. This was offset by lower margins on services driven by the lower volumes on non-standard services with fixed costs. We have implemented cost saving actions to mitigate these lower margins that will have effect in Q3.
The improved cost base from previous cost-saving programs partly protected the segment result, but could not offset the lower volumes and the lower margins in non-standard services, and the segment result landed at SEK 31 million versus SEK 46 million last year. This corresponds to a segment margin of 2.3% versus last year at 3%. Moving then to page seven, you have an overview of the FTE development over time. We have constantly worked with our operational efficiency and optimizing our resource bit by bit. In the last year, in Q2, we did a major reorganization with the focus to improve our go-to-market capabilities, but also to cut costs to match our current market situation, and we removed over 200 roles. Since then, we have continued to reduce our workforce.
As we can see in Q2, we have reduced our total workforce with 226 FTEs or 10% versus the last quarter, last year. If we prolong the period and look over two years, we have taken out more than 300 FTEs or a total of 14% of the total FTEs. Looking ahead, we have, as we have said, done additional cost in our non-standard services to offset the declining sales, which was executed at the end of Q2. We have also initiated further reductions with aim of saving SEK 80 million yearly, its full effect from Q4. Our cost optimization journey continues in line with our strategic focus. On page eight, we looked in at our leverage development, and leverage landed at 2.7x compared to 5.11x last year and 3.1x in Q1.
So we have seen a continuous improvement driven both by improved results and improved cash position, as well as a positive forex effect. In addition, we also apply an updated definition of net debt as described in the previous report, which drives circa 0.2x of a positive effect versus last year. Overall, we are of course very happy to see this improvement in leverage after a period of higher levels, and that we are now in line with our target range to be between 2x- 3x. Moving then to cash flow and CapEx on page nine. We see that the cash flow for the period was +SEK 172 million versus SEK 89 million last year. So good improvement also on top of the improvement we saw in the first quarter.
Looking at the details, we see that the cash flow from operating activities before the change in net working capital was flat versus last year, and the cash flow from change in net working capital was +SEK 169 million, despite an increase in inventory. We will look more at the net working capital on the next slide. In total, the operating cash flow was +SEK 258 million in the quarter. Cash flow from financing activities is mainly repayment of leasing debt and at a similar level as previous quarters. Looking at CapEx, we see that the total investment was SEK 92 million, of which SEK 39 affected the cash flow. This is mainly linked to IT development investment and slightly lower than last year. Coming to page nine and looking at the net working capital development, we see that net working capital landed at -SEK 46 million.
This is an improvement versus last year at SEK 60 million and also an improvement versus the previous quarter at SEK 139 million. The accounts receivables declined, supported by active actions to settle receivables, and this was the main driver of the improvement in net working capital. Inventory increased versus the previous quarter as expected, partly due to that the previous quarter was quite low due to timing effects, but also as a result of the shortage in memory components, putting pressure on inventory levels to secure delivery. Compared to last year, the inventory levels were actually declining. We do expect inventory levels to vary in the coming quarters, depending on opportunities to drive sales and margin, as well as the need to secure deliveries in the current market environment with the impacts from component shortage.
As said before, we always have some timing effects between individual quarters, but our long-term target for net working capital remains to be around SEK -100 million. With that, I would hand back the word to Samuel.
Thank you, Julia. To summarize the quarter, we report continued organic growth supported by strong development within the public sector and despite meeting a strong comparable quarter and a discontinued consumer business. Gross margin decreased mainly due to the mix effects from strong public sector growth and continued price pressure in the Netherlands. The adjusted EBITDA margin was stable since executed efficiency measures compensated for lower gross profit. Cash flow from operations was strong and our leverage decreased and is now within our target range. Moving on to the market outlook. During this quarter, we have seen stabilization in the market. Looking ahead, uncertainty definitely continues due to the current geopolitical and economical climate, and also the expected continuation of volatility driven by component shortage, where we expect prices to continue to increase, and a potential limited availability on lower and mid-end products.
Building on this and looking forward, our focus going forward is very clear. We are driving a set of initiatives aimed at delivering a stronger Dustin and profitable growth. We are accelerating the execution of our strategy with a full emphasis on our position as the preferred IT partner for B2B customers. This means working closer with our customers and leverage on our full service offering. At the same time, we're strengthening our local go-to-market execution and performance through the new sales organization. It will increase our ability to capture local market opportunities and being faster at meeting local customer demands. We also continue to accelerate the transformation towards our standardized and scalable service offering, which is key to improving both efficiency and margins over time. In parallel to this, we are taking decisive actions on cost.
We're implementing efficiency measures to deliver annual savings of around SEK 80 million, with full effect from the fourth quarter. In addition, we're now conducting a full review of our indirect spend to further optimize our cost base. Finally, in this current market environment, we remain focused on managing risks but also capturing opportunities, and do that supported with our strong customer relations, strong and wide supplier base and relationship, as well as our high delivery capabilities. With that, we open up for Q&A.
If you wish to ask a question please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question please dial pound key six on your telephone keypad. The next question comes from Jesper Stugemo from Handelsbanken. Please go ahead.
Yes. Good morning, Samuel and Julia. Can you hear me?
Yes.
Yes. Okay, great. So I have a follow-up on the memory prices topic, supply shortages, et cetera. How has that impacted the volumes here in Q2, LCP versus SMB? I guess LCP customers are a bit more less price sensitive, but what do you see here?
If we look to the quarter, I think we clearly see an impact in the market of this shortage, definitely affecting price levels. It has meant a lot of work for our organization, both in terms of working with our vendors, supply chain, with our customers. I think in the end, the net financial result, the impact of that has been very limited. What we have seen is that we have seen some volumes being brought forward into this quarter by some of our largest customers, who wants to safeguard availability for the rest of the year. That has been in some cases in LCP. In SMB, we haven't seen that much impact at all, to be honest. We do see that demand has flattened out. On a low level, of course, but at least flattened out, but no major impact from the component shortage yet.
All right. Do you see any risk as a vendor for you being squeezed when price increases, i.e., that you have pieces in your inventory already sold, not yet delivered, but then you have these retro price increases from Intel or HP? How are these contracts settled?
Well, I think we have both risks and opportunities which we are managing on a daily basis. Risk lies with some of the larger contracts where we have a limited possibility to change prices on a frequent basis. That's a risk we're managing by close collaboration with our customers and, of course, close collaboration with the vendors and the partners. We also have an opportunity in our transactional business towards the SMB market where we buy in, put especially PCs on stock, which increase in value over time, and where we can get some more margin when we sell it later on. If we look into how this played out during this quarter, I would say that the effect has been neutral. We've seen some additional volumes in LCP, but other than that, I think the net has been neutral.
That's the way our business is positioned in this, and it's a lot of work, but we're doing it, and we're doing it daily, and in the quarter, the net effect of it was limited.
Okay, perfect. Thank you. One last question from me on Netherlands, if you could provide us with an update around the competitive market. Do you see any signs of a stabilization or anything? If it's possible to answer, how much better would the gross margin have been if you exclude Netherlands and these price-pressured contracts? Thank you.
Well, I can start, and if we start with the last question, that's not the number we're going to disclose. If I go to the first question, I think, and I said it already in the Q1 call, I think the level we are at now from a market and price pressure point of view is the level we will have to learn to live with. I don't expect it to get worse, but I think this is the level it will continue to be, given the change in market dynamics with going from a larger share of single-supplier frame agreements to more a multi-supplier frame agreements, and that adds price pressure. I think the level of that will probably stay as it is now, so I don't expect it to get worse.
The way for us over time to work with this is one, the thing we're doing now with a stronger local management and local-focused sales organization. It's also about growing in the private sector and growing with our services, such as takeback and lifecycle services. That's a journey that will take some time, but that's a journey we have started.
All right. Thank you for that. Good luck in Q3.
Thank you.
The next question comes from Mikael Laséen from DNB Carnegie. Please go ahead.
Okay, thanks. I have a question on the cost savings that you have initiated, SEK 80 million. Could you break down how much of this is headcount versus procurement and other efficiencies, and how much is already realized versus still to come?
The SEK 80 million we announced, that is headcounts, 100% coming from headcounts, and we expect it to be materializing during the fourth quarter. On top of that, we are also now performing a review of indirect costs, but that is something for the future. The SEK 80 million now is headcount.
Okay. Should we expect any reinvestment of these savings into sales capacity or services or other things?
I think-
Or this will go through to margins?
I would expect some reinvestments of this into initiatives that we need to do to especially strengthen our go-to-market capabilities. It will be done always with an eye keeping a balance of the bottom line result, of course. I would expect a small part of this to be reinvested.
Okay. Got it. You're talking about the non-standard services here a bit. That part is weak or underperforming. Could you explain how much of your services revenue is non-standardized and standardized, and the different profitability levels maybe, and the revenue trajectory and what you're doing in these different areas?
I think we can say it like this. From a revenue point of view, the non-standard part is the minority of our full managed services portfolio. The area in itself is weak and an area where we're not making money in this quarter, and therefore we need to take actions. Over time, as we've said, this is an area where we're transforming our customers on the portfolio into the standard portfolio, which we have and where we have the majority of our business, and that's where our future lies. What we're doing now is, step by step, taking down cost, but in parallel also looking if we can accelerate that transformation journey to eventually completely get out of the non-standard business.
If I can add, we're also seeing that some of these customers are churning.
Yeah
It is also going to be a bit of a continued loss of sales that we're basically mitigating then with cost cuts.
Okay. Got it. Thanks. A final one on the LCP side, just wondering if you can comment on the maturity profile of your current LCP contract portfolio. Are we seeing more renewals ahead or extensions or new wins that could impact top line or margins that we should be aware of?
This is not something that we disclose. We always have a mix of incoming and outgoing and re-wins of contracts. This is reality we live with every quarter.
Okay. What if it's sort of overall, in an early stage than you usually have impacting margins? You typically have a bit lower margins in the early stages of a contract.
Yes
Sort of improves and gets better over time. Just in general terms, if you would normalize this over the last five years, maybe.
Yeah. Sorry, if we look back a couple of quarters, we've talked about that as part of the explanation. That has been true, especially in Belgium, for instance. I wouldn't say that that is something that has a material additional impact now. I think now it's more in the balance as it usually is. Nothing exceptional.
Okay, great. Good to know. Maybe a final one, if I may. You mentioned also that there was some sort of pull-forward effect here from potential price increases from your customers in the LCP side. Can you sort of indicate anything how much that potentially was in the quarter?
I mean, it's hard to give an exact estimate on how much orders were actually pulled forward. We always have a bit of movements between the quarters.
Mm-hmm.
If I would give a number, roughly, I would say that it can account for up to 4%, actually, of orders being moved forward, around SEK 200 million in sales.
Okay, great. Thanks a lot.
You're welcome.
The next question comes from Daniel Thorsson from ABG Sundal Collier. Please go ahead.
Yes. Thank you very much. A question on the public sector pre-buying and LCP. Did you see any differences between markets, like Nordics versus Benelux? Larger effects or smaller effects?
No, I think it was across the board, actually. We're in active dialogue in all our markets with all our customers. I think we could clearly see the larger ones being the earliest to act and realize the market situation. That's where it started, of course, but it's a dialogue that is happening across all markets.
Okay, I see. Linked to that, I guess that the higher PC prices will affect low-price PC volumes most negatively, given price sensitivity. How is your margin between high and low-end PCs, if any meaningful difference?
In percentage points, I wouldn't say it's any meaningful difference. Of course, when the price go up, the actual margin can go up also, but in-
Profit.
Exactly, the profit. In percentage points, I wouldn't say that it's any big difference.
Okay. I see. That's clear. On SMB growth, when will the B2C discontinuation fade on comparable numbers?
Since we exited it now in this quarter, you will have this impact until the first quarter of next fiscal year, basically.
Okay, it's kind of started in this quarter. We have it for the next three quarters then.
We basically exited everything in December.
Yeah.
In mid-December, yeah.
Will it be similar magnitude of the impact? On a year-on-year basis here, you say around 4 percentage points or 5 percentage points or even 6 percentage points. Is that what we should expect within SMB?
I mean, the SMB business doesn't have a large cyclicality, so you can assume that it has been similar size over the year.
Yeah
I would say, without knowing it.
Yeah
Not having the numbers in front of me, to be very honest, but that would be my estimate at this point.
Yeah. No, I see. That's clear. Also linked to the question regarding reinvesting these annual savings, I mean, it's a balance between margins and bottom line and the reinvesting in growth, but when should we expect to get more margin targets, new financial targets? What level you would like to come back to, because the old financial targets are not relevant at all today, I guess, for us to understand what kind of level of margin you would like to approach?
I mean, the targets that we have set now is the one that we have, and the targets are set by the Board. Until then, these are the targets that we are living with, that we are trying to obviously get closer to as much as we can, but it's a long journey. I don't know if you want to add anything, Samuel.
No, as said, it's a discussion and a decision for the Board eventually. If and when we get to that point, we will come back to it.
Yeah, because I assume that you are far away from the margins, which means that you shouldn't reinvest anything in growth. You should rather drive the margin upwards with the headcount reductions, cost reductions. I also think that given what's said around the Netherlands, that we will have to live with this new type of market development going forward. Maybe a lower margin sustainably should be a better target. Just to get a comment on that or a timeframe when we could expect it, like later in this year, or what do you think is a fair time?
Let me put it like this. I think it's a very valid point, a valid question. We're not yet in a position to fully answer that. As soon as we are, we will.
Clear. Thank you very much.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Thomas Nielsen from Nordea. Please go ahead.
Thank you very much for taking my question. It's encouraging to see your balance sheet is now much stronger with leverage in your stated financial target range. What is your thinking on capital allocation given the stronger balance sheet with regards to dividends or potential share buybacks, M&A opportunities?
I mean, our current policy obviously stands with a 70% dividend payout out of net income. At the moment, I would say we are not looking into any major acquisitions, obviously, but the focus is on the growth and the margin journey ahead of us.
Okay.
Last one.
The second final question from my part, you saw a negative mix effect on the gross margin in Q2. What kind of mix effects on the gross margins are you expecting in the coming quarters?
I think that's very hard to estimate. It's very dependent on how the demand will fluctuate across our different segments. There is always a fluctuation quarter-to-quarter. I think that's hard to estimate. We had it in this quarter. If we would see the same trend, we would have it next quarter as well, but I think that's too early to tell and hard to estimate.
I mean, as we said, the main mix effect is the move of increased sales to public, where we have lower margins and sales declining in the SMB segments where we normally have higher margins. We've seen that trend in the previous quarter as well.
Yeah.
I mean, obviously, we don't guide for the future, so it depends on how the future will develop for us.
Okay. Thank you very much.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
Thank you very much. Well done. I'd just like to thank everyone for listening in and asking relevant questions to our Q2 report. With that, we'll close the call. Thank you very much.