Hello, and welcome to the Karnov Group Audiocast with Teleconference Q1 2022. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Today, I'm pleased to present CEO Pontus Bodelsson. Please begin your meeting.
Welcome everyone to this earnings conference for Karnov Group. We're going to present the outcome of the first quarter of 2022. Next slide, please. I am Pontus Bodelsson, President and CEO of the company. With me, I have our CFO, Jonas Olin, and our head of investor relations, Erik Berggren. Jonas and I will present the outcome of the first quarter using a few slides, and then we'll open up for questions. With that said, let's get started with the presentation. Please go to slide three. We are pleased with the outcome of the first quarter. Both our market segments have been successful in growing the business with solid margins. Further, we have progressed in the contemplated acquisitions in Spain and France. Net sales grew by 9% in the first quarter, and organic growth was 5%.
We still see the same drivers as in previous quarters, and those are mainly an increasing demand for our new and existing offerings from both new and existing customers. The adjusted EBITDA margin was 41%, which is in line with the corresponding quarter the previous year. Our leverage is on the extraordinary low leverage of 0.8x at the end of the quarter, giving us a strong financial position for 2022 and making us prepared to complete the acquisitions in Spain and France. Let's go to slide four. I will now comment a little on our segments, starting first with Denmark. Our Danish businesses have had a solid start to the year. The organic growth was 3.7%, and the adjusted EBITDA margin was 41.0%.
In the first quarter, we have received the first orders for our newly launched municipality solution and onboarded the first customers. We see a market trend with increased demand of law services from both law firms and the public sector, and we are able to deliver on that. To drive further awareness of our premium curated content, we have also launched product-specific value proposition videos as well as videos with a number of our Danish authors. In the first quarter, we also released the annual edition of Karnovs Lovsamling, and it is still a very appreciated product among our customers and in society. Turning the page to slide five. In Sweden, Norway, our businesses continue to perform well. In the first quarter, organic growth was 5.8%, and the adjusted EBITDA margin was 40.6%.
We keep being on our toes, focusing on developing new features in close collaboration with our customers. The growth drivers are the public sector, municipalities, and EHS. Just like in Denmark, we see a market trend with increased demand of law services, both from law firms and the public sector. Our Norwegian business, DIBkunnskap, has now launched their IFRS service in Sweden and onboarded the first customers. They have also released a document management solution called DFlow in Norway and had their first sales of the solution. In the first quarter, we released the annual edition of Sveriges Rikes Lag. Just like in Denmark, this is a very appreciated product among our customers and in society. Turning the page to slide six. In December, we announced that we have signed a binding offer to acquire carve-out legal information-based businesses in Spain and France.
Since the announcement, we have completed consultations with the French and European Works Councils. At the end of February, we signed the share purchase agreement and have filed regulatory documentation in Spain. We proceed in line with the transaction process, and the transaction is anticipated to be closed during 2022, giving clearance from the Spanish antitrust authority. We are currently working on a merger plan with relevant work streams, ensuring a successful integration, and we are getting ready to complete the acquisition, both financially and on an operational level. Next slide, please. I will now hand over the floor to our CFO, Jonas Olin, who will tell us more about the financial results in the first quarter.
Thank you, Pontus. As you said, we've had a solid start to the year. Let's start with an overview, switching to slide 8. Net sales in the first quarter were SEK 255 million, corresponding to a top-line growth of 9.2%. We've seen increased demand for our services in both our markets, our main markets, which we were able to deliver upon. The organic growth was just below 5% and the acquired growth and currency effects 2% each. The organic growth drivers were mainly sales to new customers and upselling to existing customers within the public sector, municipalities, and our EHS vertical. As DIBkunnskap was acquired in January last year, I just want to remind you that DIBkunnskap is now included in our organic growth.
The acquired companies, the remaining re-acquired companies have performed in line with expectations in the quarter. Let's move to slide nine, please. Adjusted EBITDA was SEK 104 million , up SEK 9 million, or almost 10% compared to the SEK 95 million previous year. Our margin was stable on a satisfactory level in the first quarter, and the adjusted EBITDA margin was 40.8% in the first quarter, which is in line with the previous year. 40.8% is also slightly higher than for the typical full year due to the seasonality of our business. In the first quarter, we had items affecting comparability of SEK 90 million , and these are completely due to the contemplated acquisitions in Spain and France and the post-merger integration plans.
Move on to slide 10, where you can see the net sales development in two different views, and you can also see that in the first quarter, both the online and our subscription-based sales grew. First, to the left, you see that the online business increased its share of our group sales by 4 percentage points to 79%. The share of subscriptions in our sales to the right on this slide increased to 85% in the first quarter, which is 2 percentage points higher than last year. Let's move on to slide 11, where we have one of our two segments. In Denmark, we are pleased with the performance that we have seen in the first quarter. In the quarter, sales grew 9%, of which organic growth was 3.7%, and the acquired growth amounted to 1.2%.
Currency effects had a positive impact of 3.7% on the net sales due to the weaker Swedish krone. Organic growth was driven by strong online sales, where we see an increased market demand and where our solutions are appreciated among our customers. In the first quarter, we closed the first customer contracts for our new municipality solution in Denmark. Adjusted EBITDA improved by 4%, and the adjusted EBITDA margin was 41.0% in the first quarter. The decreased margin is due to our acquisitions and consolidation of the legal tech startups, which are in a scale-up phase. If we adjust for these, the margin was stable compared to previous year. Move on to slide 12, which is the Swedish and Norwegian segment. We continue to grow our businesses in this segment, and net sales increased by 9.7%.
Organic growth was strong at 5.8%, acquired growth accounted for 2.8%, and the currency effects from the Norwegian business had a positive impact of 1.1%. The organic growth comes from good online sales to new customers, as well as upselling to existing customers. We are proud to say that we continue to gain market shares in the public sector, municipalities, and in our EHS vertical. DIBkunnskap, as Pontus previously mentioned, launched their IFRS service in Sweden at the end of last year and had its first sales in the quarter. As we acquired the entity in January last year, DIBkunnskap is now part of the organic growth also in this segment.
Adjusted EBITDA margin improved by 160 basis points to 40.6%, driven by the increased net sales and the different product mix. Let's move to slide 13 and our cash flow. As expected, our adjusted operating cash flow and our cash conversion reached high levels in the first quarter. This is due to our invoicing seasonality, where the fourth and the first quarters generate a strong cash flow in our business. I want to point out that we have adjusted the definition of the adjusted operating cash flow to consider only the cash effect from the items affecting comparability, and this means a slight adjustment of the Q3 and Q4 numbers for 2021 as well, but still on a very strong level.
As Pontus mentioned, our leverage was 0.8x at the end of the period, and this is due to the strong cash flow from the operating business, as well as the net proceeds from the directed share issue we carried out in December. We have secured bridge financing for the intended acquisitions in Spain and France, and with the share issue done, we are ready to execute. I'm now handing over to Pontus again, who will present our final slides.
Thank you, Jonas. Please switch to slide 14. I just want to conclude this presentation by presenting a summary of the highlights of Q1. We had a solid start to the year with an organic growth of 5%, adjusted EBITDA margin of 40.8%, and a leverage at 0.8x. We grow on both our segments. As we manage to deliver on an increased market demand, we see a trend where we sell more licenses to customer groups without formal legal education. We continue to be on our toes, developing with customer centricity in mind. It is of utter importance to provide solutions for their challenges of today and the possibilities of tomorrow. We prepare for future growth as the transaction process in France and Spain proceeds according to plan. Next slide, please.
By this, I'll end our presentation, and we are now ready to take questions. I'll hand over the conference again to our host.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad now. Our first question comes from the line of Erik Moberg from Berenberg. Please go ahead.
Morning, gents, and thanks for taking my question. To start off, if you please could dive into the underlying drivers, and if we start with Sweden and Norway, organic growth accelerated during 2020, and this appears to have been sustained here in Q1. If you could sort of bridge the effects of the price versus volume, it would be really helpful.
Good morning. We can see a slightly different product mix in this quarter. We have a growth in our online products, and in our online products, we have a higher margin, so that's contributing. On the other hand, normally every second year, we publish an EU content handbook, and we published it in 2021, not in 2022, that minimizes in a way our offline sales during this quarter. By saying that, I refer to a slightly different product mix with more sales from online products, so therefore also a higher margin, so to say.
When it comes to prices, well, as you know, we constantly strive to make our customer benefit and the value of our products even stronger day by day. There are no specific comments to pricing actually. Constantly as we try to make our customers more and more efficient over time, there will of course be an opportunity to raise prices as well.
Understood. Sort of if we just think about the year-over-year increase for this segment, percentage-wise, what is it fair to assume that, environmental health and safety, constituted?
Well, EHS is an interesting vertical and we can expand these thoughts not only in Sweden but actually getting into Europe as a whole. As you know, we made an acquisition for Echoline in first of October, and we can see that the whole EHS vertical is performing very well, not only Echoline in France, but of course also our Swedish company, Notisum. It's a vertical that we have a strong belief in. And the French acquisition of Echoline is sort of foothold in Europe. We will constantly be looking out for new possibilities in Europe. Yes, correct, EHS is something we do have a strong belief in.
While we're on the subject, just ballpark number, percentage-wise, how much of full group was this in Q1, and where could you see this head over the longer term?
We don't disclose the separate numbers for individual companies, but it's a smaller part of the business.
All right. If we move to Norway, obviously as you just recently launched, but if you could just perhaps go over your offering and how you differentiate yourself versus your key competitors and how we should perceive this option over the longer term.
Yes. I assume you mean DIBkunnskap in Norway.
Yeah.
They have a strong brand with a long history of making life easier, so to say, for the tax and accounting employees in many companies. They have a very strong position among listed companies at the Oslo Stock Exchange. They have both really big companies as customers, but also smaller ones. I'd say that it's a workflow tool, but also incorporating a lot of knowledge and making, as I said, life easier for those. What we can see is that this opportunity in getting into Sweden with DIBkunnskap IFRS product is really exciting to see. Also happy, of course, that we've had our first customers onboarded in Sweden.
Apart from that, they are working hard to be really innovative also back in their home markets, so to say, in Norway. They released the dflow product, document management solution, in this quarter, and they've also received their first customer on that. They strive very hard to make sure that they constantly improve the working life for their customers and making their workflow tool even more efficient going forward. High hopes for DIBkunnskap both in Norway and Sweden.
To follow up on that, and in terms of growth rate, where do you see this go over the, like, over the coming years, so to speak? I assume it will grow faster than the remainder of the group. If there is any color you could add there, it would be really helpful.
Well, they are growing, of course. I shouldn't make any prognosis there, but I can say that. Well, we look forward to what they can do in Sweden. They have, as I said, a large portion of the listed companies in Oslo, and I do believe that they will get that in Sweden as well. No numbers. It's way too early.
Understood. Then just lastly on Denmark. You mentioned your new municipality solution. If you perhaps could elaborate a bit more on the reception from the clients you have onboarded as well as their overall outlook. Do you see potential to accelerate growth in Denmark in the same manner as you did in Sweden during 2021?
Yes, it's interesting, definitely. We launched the municipality product in Denmark by the first of September last year, and it's built on all the learnings that we have had from the launch of the municipality product in Sweden. It's a very good example of how we try to learn from experiences in one market and then starting to launch an even better product, so to say, in Denmark already from the beginning. It's a nice way of seeing how we work over the borders from different markets. From the launch in first of September, we could see that the municipalities are really interested, but it's public bidding, so it takes some time. But they have been enthusiastic.
We now receive the first customer, and they are now onboarded. It's Viborg Kommune, which is really interesting to see, and we will follow them closely. There are more on their way. We are really excited about this product. Again, as I said, now starting to use the learnings from one market, all the learnings from the Swedish municipality product and trying to replicate those improvements so to say, already from the beginning when we launched by the first of September.
Understood. Thank you very much. That's all for me for now. Thank you.
Thanks.
Just as a final reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. Our next question comes from the line of Daniel Ovin from Nordea. Please go ahead.
Yes. Good morning, Pontus and Jonas, and thank you for taking my questions. I had a first question also on the organic growth, which was strong, close to 5%. You also mentioned that it's driven both by new customers and upselling. I thought maybe could you break down how much of that growth is basically driven by new customers, just for us to get an idea? That's the first question. Thank you.
Well, yes, you're totally right. It's upselling to existing customers and sales of new products and also, of course, some new customers. We don't disclose the number between new and existing customers. Yes, I agree. It's a good sales for the first quarter.
Just perhaps which is the largest driver, which is the primarily, of the two?
It's upselling to existing customers.
All right. Okay, great. That's very helpful. Then another question on the Danish margin, which was down a bit versus last year. You also mentioned here that it's due to acquisition and consolidation of legal startups. Maybe you can give a little bit more information around what that exactly means. Also how should we think about that going forward? Is that the work that is now completed, or is it something that's gonna bear on the margin also in Q2? That's the second question. Thank you.
Yeah. The companies in which we are discussing here is BELLA Intelligence, which is a legal tech startup that works with workflow tool for bankruptcy law, and it's Ante, which is an AI search legal tech startup. It's a way, as we might have discussed before, it's a way of constantly being on our toes to make sure that we improve and using all those new ideas from legal tech startup firms. Yes, these are two, but it's a part of our strategy to make sure that we stay close to those interesting new legal tech startups. It might be other cases in coming quarters, but this time it's BELLA and
I don't know, Jonas, if you have any numbers on that.
The numbers of, I mean, in the total picture, they are fairly small, but of course that impacts on the margin side. It's about SEK one and a half million that has affected the results in the quarter.
Great. That's very helpful. Thank you very much. Then just one last question also when it comes to the acquisition of the Spanish and the French assets here. It seems like on what you write in the report that you're now only waiting for clearance by the Spanish antitrust. Is that correct? Is that the only part here that you're still waiting for?
That, that's correct, yes.
Okay. On timing-wise, I think I heard you say previously that you submitted the application in February. Was that correct? Also, do you have any sense of what is the average time? How long does it usually take for these type of decisions?
Well, it's a long and complicated process, and you could always argue at what exact time you file the application, so to say. We have been in discussions with them for many months. With them, I mean, the antitrust authorities in Spain. The very last filing part of the process was actually made this week, yesterday. Nevertheless, the process has been going on, and we have tried to be really close to the antitrust authorities to make them get all the information they need. We do think that we have a good process together with them. Regarding the exact time of a go ahead from them, we can't be sure.
We hope to have it in the later part of the summer. It could be even longer, but we still have a very good feeling that this is going to happen in 2022. We are very positive on that fact.
Perfect. That's very helpful. That's all my questions. Thank you very much.
Thank you.
As there are no further questions, I'll hand it back to the speakers.
Thank you very much. Thank you all for listening, and thank you for the questions. We will disclose our Q2 report on the eighteenth of August. We hope to hear from you then, if not earlier. Thank you very much.
This concludes our conference call. Thank you all for attending. You may now disconnect the lines.