Welcome to the Knowit first quarter 2026 interim report conference call. I am Judith, the call's operator. I would like to remind you that all participants will be in a listen only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Per Wallentin, CEO. Please go ahead, sir.
Thank you, warm welcome to this presentation of Knowit's report for the first quarter, 2026. My name is Per, with me I also have our CFO, Marie Björklund. Well, as a start, as probably most of you saw, after this report was published this morning, we also released that I have intention to step down as CEO. I will stay over Q2 and then hand over in August. This is a decision that has developed through an open and constructive dialogue between me and the board. The timing is right both for me personally, I think it's right for Knowit as well. As you all know, the past three years has been demanding, adapting to challenging market and weaker economy.
We have taken difficult but necessary decisions to strengthen our efficiency and long-term resilience. I'm really truly proud of how we have navigated this period. This period, I think it's now largely behind us. We have a stable foundation for the future. With that said, the focus now shifts back towards growth and innovation in high speed with AI all over it. I think that the future, with this long-term growth and long-term change in this business requires a long-term leadership perspective. I've been part of Knowit for 27 years in leading roles and the past 15 years as CEO. I believe this is a natural transition point. I am very pleased that Fredrik Ekerhovd, hopefully will step in as acting CEO from August.
He is currently the head of our largest business area Solutions and he's been part of our management team for almost 10 years. He brings deep knowledge of our business, our culture, and our clients. Knowit will be in very good hands during this transition, and of course, I will help in all ways to make it a really good transition as well. That's really important for me. Well, now over to the report and some operational highlights in the quarter. We see continued improvements in our operations. Utilization is up in all business areas with Solutions as the engine in that development. Important is that we gradually improve utilization in Sweden, especially in Experience, where we also see organic growth for the first time since a couple of years and expanding more margins in the quarter.
In light of the rapid technology development driven by AI and structural changes, we need to continue optimizing our organization. This includes replacing some competencies with others. This is really important for long-term growth, that impacts EBITDA this quarter. Next slide, please. We will now take a look at our business areas in more detail, starting with Solutions, our largest business area, accounting for around 50% of total revenue. Reported net sales of SEK 717 million for the quarter. The EBITDA margin was 9.3%, in line with the same quarter last year. We continue to see a strong utilization trend. We saw a slow start in the quarter, but the development was really solid in March.
We continued to protect profitability through cost control and operational adjustments. These adjustments have impacted EBITDA and EBITDA margin this quarter. We have several ongoing initiatives to truly become a data-driven organization and see great opportunities driven by AI, both for delivery and operational efficiency. Next slide, please. Over to Experience, our digital agency. Reported net sales of SEK 276 million in the quarter with an EBITDA margin of 6.3%, a small improvement compared to last year. We achieved solid operational progress across the business. Utilization has improved, which is a key driver for us when we, and we've been able to maintain a stable margin. In Sweden, we deliver a clear turnaround.
Utilization is strong, margins are improving, and we're back to organic growth. The actions we've taken are really working. Although in Norway, we are downsizing part of the business in the quarter. The focus has been on sharpening our client offerings to ensure that we have the right competencies in place. This affects margins, deliberate investments to improve our future performance. We also continue to evolve our offerings in more advisory roles, helping our clients to understand how to use AI and to use that in a broader digital transformation. That's an area where we see strong demand and clear long-term potential. Moving. Next slide, please. Moving over to business area Connectivity. Reported net sales of around SEK 145 million for the quarter.
EBITDA margin was 5.4%, improving compared to last year. We continue to see stable delivery and strong utilization. The margins have improved for the third quarter in a row, indicating that the measures we've implemented are having sustainable effects. We think that geographical flexibility is becoming more and more important for efficient delivery and margin expansion, and this will also position ourselves for further growth. Although we have seen some short-term impact from individual clients postponing projects also in Connectivity during the quarter. At the same time, our ongoing effort to reduce dependency on single clients are paying off. We have a more balanced client portfolio today, which makes us more resilient going forward. Over to business area Insight. Reporting. Next slide, please.
Reporting net sales of around SEK 226 million and an EBITDA margin of 1.7%. Of course, that's clear with that margin, we had a weak start to the year with softer demand and negative margin development. This has been particularly evident with traditional management consulting, where market conditions are challenging. That said, we are having more dialogues with clients, and activity levels are picking up. However, decision-making processes remain slow, with continued delays in conversions into actual projects. As we have been talking about before, we are actively investing this quarter as well in areas where we see strong and growing demand, such as ERP. We start ERP delivery in Sweden right now, cybersecurity and defense.
Of course, these are important focus areas that will support both our relevance and our growth going forward. Both parts where we downsize and parts where we actively grow in Insight continuously. Next slide, please. Over to our new business area Product. Reported net sales of around SEK 95 million for the quarter, with an EBITDA margin of 12.8%. This new business area is developing steadily with strong deliveries across several segments. To highlight some areas, we have a strong demand in areas such as defense, security, trusted identity, and smart mobility. I think that these are segments that we are highly relevant and where market demand is growing quite a lot. We have strong opportunities in helping clients leverage AI.
Just as importantly, it will also, especially in this business area, strengthen our own scalability, allowing us to grow without relying solely on adding more people. To be clear of the business model in products, we are operating in the intersection of traditional consulting and software development. I think that this is an area that we will remain resilient and even grow in the face of AI-driven disruption. It is really interesting to follow for the next coming years, 5-10 years. Next slide, please. Now I would like to turn to Marie, and go through the figures a little bit more in detail. Next slide, please, as well.
Thank you, Per. Back to the group as a whole. We delivered sales of approximately SEK 1.4 billion, a decrease of 9% compared to last year.
Adjusted for performance effects from acquisitions, divestments, and effects, the decrease was 4.5%. The number of working hours in the quarter was slightly lower, with two fewer hours, which had a negative impact. We also had fewer employees than last year. The average headcount during the quarter was down by 5%. EBITDA amounted to SEK 83.9 million, compared to SEK 104.5 million last year. EBITDA was affected by restructuring costs of SEK 18 million related to layoffs during the quarter. Just to be clear, since I got a question on this has not been adjusted for in the SEK 83.9 million EBITDA. Apart from this, utilization continues to move in the right direction. However, competition remains high, leading to continued price pressure. Increasing prices to offset salary revisions remains one of our top challenges.
The EBITDA margin was 5.8% compared to 6.6% last year. However, if we adjust for currency, calendar effects, and restructuring, the margin was slightly higher than last year. As mentioned, the market continues to be challenging, but we see significant potential to further improve margins and growth. Next slide, please. This slide shows the development of our net debt and confirms that Knowit continues to have a healthy balance sheet and a solid financial position. At the end of the quarter, net debt amounted to SEK 339 million, corresponding to a net debt to EBITDA ratio of 0.7x, which is well within our financial target of maximum of 2x EBITDA. Interest-bearing liabilities are stable, and other liabilities mainly reflect IFRS lease liabilities that do not indicate increased financial risk.
With low leverage and significant headroom versus targets, we are well-positioned to future possibilities and to maintain financial discipline. Next slide, please. This slide shows the development over time and also on a rolling 12-month basis. Our adjusted EBITDA for the latest 12 months is at SEK 316 million, and revenues at SEK 5.7 billion at an EBITDA margin of 5.6%. Again, restructuring costs have not been adjusted for. Next slide, please. We continue to demonstrate a strong and diversified customer portfolio, which is particularly important in an uncertain market environment. Our broad exposure across sectors reduces dependency on individual customers or markets. Development in the public sector is strong, up 5% since last year, supported by a solid market position, especially in Norway, also continued good delivery to key clients. This contributes positively to overall stability and growth.
The retail and service segment shows a decline, reflecting mostly one major client being cautious. At the same time, industry-related revenues have declined as several clients remain cautious following a prolonged period of economic uncertainty. The defense segment continues to develop positively, driven by increased demand and a strength and position among our key customers. Overall, we consider the mix across sectors to be healthy and well-balanced, positioning us well to navigate an uncertain market while maintaining long-term stability. With that, I leave it to you, Per, to sum up. Next slide, please.
Thank you, Marie. Well, to summarize, we continue to see solid operational improvements with the utilization rates trending upwards. That's a clear sign that we're becoming more efficient and making better use of our capacity. The rapid development in AI is accelerating digital transformation across industries, not just increasing demand, it's also opening up entirely new types of assignments for us. That's really interesting. This creates strong long-term opportunities, but in the short term, the utilization or organizational adjustments we are making to capture those opportunities do have an impact on ourselves, as you have seen now in Q1. These are conscious trade-offs to position ourselves for the future. Finally, of course, our new business area Products is performing well, both increased sales and improved margins in the quarter, fully in line with our expectations.
With that said, we are now opening up for some questions.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question is from Daniel Thorsson, ABG.
Yes, thank you very much, Per and Marie. I start with a question on the SEK 18 million restructuring costs for layoffs in Q1. Are they related to headcount reductions we saw in the quarter, or will we see these in Q2 as another step down in number of employees?
This is related to the quarter. A lot of them is actually connected to Experience in Oslo, where we close one part of the operations that we did close earlier in Sweden. That's the main part of it. It was extra lot this quarter. I think that we will continuously have some small parts of that in the future as well, but not in the size that we had this quarter.
Yes, to your question, Daniel, all of them have not left the building during the quarter.
Yeah.
The major part will leave during the second quarter.
How many-
In number of employees.
Exactly. That was what I was thinking about. Approximately how many are this related to?
I would say it's around, 20, a little more.
Okay. Around 20 left to leave in Q2.
Yes.
Okay. That's very clear. Secondly, around net recruitment, is it likely to believe in positive net recruitment in the second half of 2026, or what's your current plans for Q3 recruitment?
Well, I think that there is a possibility to that. We have always had these questions when we close Q1, and I've always said that we need to wait until end May, start in June to see our plans for Q3 and the net recruitment. Because the Q3 net recruitment phase, the last year, it's been quite late in Q3. Like for five, six, seven years ago, it start August. Now it's rather a little bit later. I think that we have to wait. With that said, we are performing higher utilization rates one step at a time. Now we are actually backing quite high figures in some areas. That's the early sign for the next phase, and that's next net recruitment.
I don't think that we will be extremely aggressive, but there is a possibility, yes.
Okay. That's clear. That's interesting. Then I wanted to also know if you could share any practical customer cases where customers are asking you to run any larger sized AI implementation projects, or is it mainly ad hoc tasks you are seeing in the market?
Oh, it's actually some large project. We have some really large project connected to the defense industry that's not possible to talk about. You will see that in the figures. I suppose that you already see that in the figures connected to our growth in that segment. I, the largest project connected to that we have right now is restructuring data and creating platforms together with some of our partners doing that. I don't have any. Christi, do you have any exact customer case right now?
I think we have one stuck in one of the municipalities like that.
Yeah.
Like the implementation of using AI to a larger extent, but I think it's mostly that it's existing projects that now have a component with AI-
With AI in it.
In like all over. Yeah.
Yeah. I think one thing that has been really clear for us connected to AI is it is in our business area Products, because that's really the sweet spot of software sales and software development and consulting. With AI, when we have a combination of our own software and consulting, we are able to lower the cost of building that software, but we still can gain from the consulting around that software. That's really interesting. In that area, I think that we have already seen some gains, and we'll continue to do that.
Yeah. Okay, I see. That's clear. The final one, just to understand what you hear from your customers nowadays. Are they delaying the planned projects during the quarter for any specific reason, or are they rather reducing the size of a project and they go with a smaller team because they want to do something, but not really sure how everything will look like in a year's time? Like, what are the effects you see from customers?
It is, if we start with Insight, of course, that's the big disappointment in the beginning of the quarter, traditional management consultancy. We see that there, in that area, it's a lot of postponements. They wait. With that said, parts of Insight connected to ERP and cybersecurity and events are growing. In traditional software development projects with some of our big customers, we see that. We are actually driving that. Connected to one big retail customer we have a lot of teams there. Usually it's like eight, nine people. We have introduced AI agents in those teams so that we can reduce.
That is something that we did already late autumn, beginning of this year as well. Reduce the amount of people in the team from maybe nine to eight, and maybe it's possible to take it down to seven and six as well. Being able to be first doing that, we are actually seeing that we can increase the business connected to that customer. We see that as well. The third part is that we see completely new blue fields where we have not been able to drive projects at all. Where the complexity and the amount of data has been so complex before, it was not possible to do anything with that data unless we had AI.
For example, one example that I've been talking about before is our project together with the defense industry called Yggdrasil, where we are able to use information from big data to enhance security. It is changes all over the place. I think that that will continue for even if we see that the technology is more and more getting in place, that technology is of course evolving right now as well. You have to bear in mind that the change will depend on the change speed together with our customers. That change in how to work and how to produce new things together with the customers will continue for several years from now.
It will be a really interesting journey. The most important thing for us is to be able to change fast and adapt new things. I think that we really have shown that we are able to do that. Our focus even this quarter have been not holding the old, but get rid of the old and just start the new things.
Perfect. Thank you very much, and thanks for all the years, Per. There are still a couple of months left that we can discuss before you leave [IC].
Yes. We will have high speed these months as well. Hopefully, really high speed this autumn as well. I think that will happen.
Excellent. Thank you.
The next question is from Fredrik Lithell, Handelsbanken.
Thank you, and thank you for taking my questions as well. First, Per, thank you for all the years and all the discussions. Have been a pleasure. I wish you the best after you leave as well, of course. I would like to come back to platforms, that division where you sort of collect your various parts of softwares or half, semi-ready sort of software so that you can sort of push on to your clients and tailor-made for your clients' purposes. I would like to get a better understanding on how many platforms you have in there, how ready they are, how much of sort of R&D internally you will need to do in order to get them ready, if any. A little bit more color on the platforms would be interesting. Thank you.
Well, I think that it actually would be in place to have a more deep dive in that connected to investors in the future. I think that because I understand that it can be a little bit unclear to understand what it is. Let's say that it, depending on how you define it's between six and eight platforms, in different areas. They are quite extensive. A lot of code, and a lot of different capabilities. With that said, they are not software as a service platforms. We had one or two of those software as a service platforms, we did sell them because what we are good at is scaling people, not software as a service.
It's really important that these platforms also need customization. I think that more and more of consulting will go this way because the cost for handling these platforms is actually we have done quite a lot of investments during the years in these platforms, not in the balance sheet, but together with the customers. The cost of doing that is rapidly going down right now. The need for partly platforms and partly consulting around these platforms is increasing. The cost for maintaining the platform will be close to zero. We will do it with AI, we will do it together with the customers.
This is more of a possibility for us to really own the competence connected to one vertical. Both connected to people, but connected to proprietary competence that we have connected to the code that we have. And I've seen some example of competitors to us starting to do the same. I think that that part of consultancy will grow faster than all the rest the coming years because it is so useful for the customer to be able to have that relationship with the consultancy.
Will you then be able to safeguard your value in sort of a price model that fits this better? Like you say, it's a lot of competence put into this. When you sell it at partly a product and partly a services, the customer don't sort of expect that it should be cheaper in any way, if you understand what I mean.
I understand what you mean. We are able to utilize the value that we create in an easier way than the companies selling solely software as a service or the company selling solely consultancy. I think that the mix will create the possibility for us to utilize the relationship with the customer in a completely different way, and we see that already.
Will you, will you-
With that said.
Yeah.
We are also working quite a lot in the other business areas with a lot of examples doing the same. In those areas, the, we have some small part with our own code, but the mix is different. It's a little code and a lot of consulting. Here it's, it is more like 50/50.
Okay. Very clear. Interesting discussion. I have just one more question on the management consulting. As you alluded to disappoint in the quarter, and a lot of projects are postponed. I mean, how long can you hold on? How long can you sort of take the pain and take the financial risk meanwhile clients are sitting and not being able to decide? Have we seen you already sort of rightsizing the FTE based on the management consulting side due to this, or is that in front of us?
Yeah. I don't think that we do hold on because if we you divide Insight in three parts, one, the traditional management consultancy, one is the cybersecurity and defense part, and one is the ERP part that we did start up a couple of years ago. During this recession, it has actually been a cost doing that. As I told you-
We did start a new subsidiary this quarter, connected to ERP in Sweden, of course, with a cost as well. I think it's really important to be bold enough to do start things in a recession to be able to utilize it. Of course, the short term results and margins would have been better if we didn't do that. Long term, it is really good for Knowit and for the shareholders in Knowit. Looking at these three parts, the part where we really struggle, the traditional management consultancy, strategy consulting, et cetera, et cetera, that part has been shrinking quite a lot the last years. We continue to downsize that part. I think that we might be able to-
Or have to do that one step more or something like that, or probably, I think that we are in some sort of a bottom right now, and we'll be able to get back to growth. That part is, actually so much smaller now in Insight compared to three years ago. The risk mitigation is already in place. We are quite happy with the structure that we have with Insight right now.
Very clear. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. To register for a question , please press star and one on your telephone.
Yeah. We don't have any questions from the webcast at the moment as far as we can see.
All right. Thank you all, and see you in Q2. For me, that will be my, what is it? 62nd quarter to report Q2. See you then, and well, have a good time.
Thank you so much, everyone.