Welcome to NEPA Q2 2025 Report Presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing the pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Anders Dahl. Please go ahead.
Thanks a lot, and welcome all to this Second Quarter of 2025 Report Presentation. I am Anders Dahl, and I'm the CEO of NEPA , and I will walk you through this agenda. First, an introduction to NEPA , then second quarter brief overview, and then I'm going to walk you through the annual recurring revenues highlights, and some words about scaling up marketing mix modeling, the product that we introduced late 2024, beginning of 2025, that we now see good interest in the market, and therefore we are increasing that organization or improving that organization with a new head of that team.
I will also walk you through the transition or the transformation we're doing on our tech platform that impacts especially our brand tracking, and then an overview of the financial results and an outlook for the remaining part of the year, and then we end up with the Q&A as a wrap-up for this NEPA is a leading marketing intelligence company, and our mission is to deliver insights that grow your business faster than every day. We track brands across the globe, and we track close to 8,000 brands or 7,500 and counting daily and measure thousands of advertising campaigns annually across more than 50 markets. We deliver insights to CMOs and to C-level executives, but also, of course, to insight departments, marketing teams, and marketing departments.
We normally deliver our reports and insights in storytelling and in presentations, in PowerPoint presentations, but of course also via dashboards that are always on, especially for our trackers that our clients use in the day-to-day decision-making regarding marketing and media investments. The business model is based on both recurring and ad hoc insights, and the core offering is brand tracking, which is our biggest product, campaign evaluation where we track campaigns on an ongoing basis, and also that we both have as an ad hoc marketing mix modeling product, but also as a continuous marketing mix modeling platform. That was the one we introduced or launched earlier this year.
We combine market survey data, which is real interviews with real people to track brands, track campaigns, and track marketing activities from our clients, but we also have a high-end consultancy that on top of our dashboard and data deliveries do the storytelling, explain, give insights, but also work very, very closely with our clients and within their organization. We have a strong presence in Northern Europe, and we have sales offices in the U.K., U.S., and also in Finland and Helsinki, and of course in Sweden as well. We have a fairly large research lab in Mumbai, in India, where we do a lot of our base work, and that kind of feeds into the deliveries to our clients.
A brief overview of Q2 is that we sustain a good momentum when it comes to sales bookings, especially on the ARR side, and you that have been with us for a while, you have seen that we are really trying to change our business model into being a more predictable and consistent recurring revenue company. We have previously or historically tended to move back a lot to ad hoc projects, but now we're really trying to push the business into a recurring revenue business. Sales bookings grew by 13%, more than 13% year -over -year, marking this quarter the third consecutive quarter with growth, especially driven by ARR.
That also shows and is a good testament to the strategy that we presented earlier this year, that we are now focusing much more on ARR and focusing much more on our core products, and have really slimmed down our product portfolio to deliver within the brand, campaign, and categories. What we have seen and what has been a bit challenging during this quarter is the cautious client behavior in Q2. We have seen budget constraints, we have seen prospects or ideas or proposals that we have sent out to be moved into the second half of this year due to uncertainties or budget restrictions within the client's organization.
We did also internally a fairly large reorganization with our client teams earlier this year, and of course that might kind of cause some momentum or lack of momentum for a short period, but now we are through that, so we will see kind of a full effect of this new organization, and we have already seen that in Q2, but we will see that even more into Q3. We launched a pretty extensive cost-saving program that is completed now, and it kind of ran through the entire organization, especially focused on the U.K. and the Swedish organization. That has taken place and it's completed, but you will see the full impact on that in Q3 and going forward.
We have also moved our head office in Sweden to a much more cost-efficient office that will reduce the cost of lease, etc., and also create a much better environment for our employees and also, of course, for our clients coming to our office. Like I mentioned earlier, we're also scaling up our marketing mix modeling team, and that is not so much adding a lot of people, it's more about transforming some of our internal resources into taking more actions into our marketing mix modeling team. It's an increase of data scientists. We're also building a more stable platform to be able to deliver marketing mix modeling as a continuous product in a more efficient way. Marketing mix modeling, as such, is probably one of the hottest topics right now in the marketing intelligence space.
Even if we are still growing and we don't separately report those numbers, we will most likely do that going forward or later on. It definitely leads to more of a high-end discussion with our clients because marketing modeling encompasses everything that the client touches with: sales, margins, profitability, distribution, supply chain, and of course their marketing and media activities. All those things go together and give the client a very good basis or a very good understanding for how to make decisions, educated decisions, and good insights to drive the client's growth. In Q2, we also had an annual general meeting on June 23rd where we, with the AGM, re-elected the whole entire board, and then FOMO was re-elected as Chairman, and the AGM also decided on a dividend of SEK 1.23 per share that was executed and done in the month of June.
As we previously announced in a press release more than a month ago, Filip Tottie stepped down as the CFO, and we are still evaluating the scope of the CFO position together with the board. The management, along with the board, and support from a very, very strong finance team are, of course, continuing to drive the strategic transformation effectively and bring a wealth of support to the organization when it comes to support for the business and making good decisions. This is a slide to explain the annual recurring revenue highlights during this quarter, to explain the underlying impact of the churn that we have pre-announced earlier this year or late last year. As you see, we went into the quarter with an ARR on March 31 of SEK 135.8 million.
We had a pre-announced churn that we have pre-announced previously of SEK 16.5 million, and that ends on a net of, after the pre-announced churn, SEK 119.3 million. Now we had a net net revenue retention loss of SEK 5.2 million, but then we had a new sales of ARR of SEK 7 million. That ends the quarter on SEK 121.1 million. That gives kind of an underlying ARR growth of SEK 1.4 million. An even better thing and a better view of this is that we actually had our ARR bookings of SEK 10 million, but SEK 3 million out of those SEK 10 million are being moved into the next quarter because that ARR business or that ARR contract is being executed on in Q3 instead of Q2. We are not reporting that in Q2.
Again, that shows that the strategy that we implemented early this year, late last year, is paying off. The investments we have done in marketing, the investments we have done in the new business and sales team, and the clearness of the way we have communicated to the market that we would like to be a long-time continuous recurring partner with our clients to be able to really help them to make educated decisions on the insights that we provide. We're scaling up the marketing mix modeling team, and we are introducing a couple of new or at least one new employee next week or within the next upcoming weeks, and we will, of course, press release those things when we see some traction in this team. This is a very important area for us and one of our core areas for the future.
We've done marketing mix modeling for quite some time as an ad hoc product. Now we are transforming that into a continuous marketing mix modeling product that will give us recurring revenues, but also for the clients to really be able to see the changes in their investments and their landscape over time. This is a very exciting, kind of forward-looking growth initiative that will help pay off in a very visible way for the next upcoming quarters. We mentioned before that we have done, I think already in the last quarterly report, some first initiatives in order to transform our old legacy platform into a new tech stack for brand tracking. That has been on its way now during the first half of this year.
We have done proof of concepts, and we have done some pilots with some clients and run in parallel on a new tech platform, and we do see very promising results. This will make us much more predictable when it comes to the tech investments we have to do going forward, but it will also reduce our total cost of ownership for the tech stack. Of course, a better client experience. Dashboards and client tech will be easier to maintain and develop together with our clients depending on our clients' needs. On top of this, it's all fueled and supported by AI within our products, within our way of working in our organization.
We will talk more about this, and I will most likely invite Jacob, our new CTO, that is spearheading this project during the next or the upcoming quarterly report to give a little bit more details about this. This is a big shift and a big change in our way of operating. Like I mentioned before, it's been a challenging quarter when it comes to ad hoc sales, and of course the previous churn that we have informed about impacts the revenue in this quarter. Even if we have proven strong new sales in ARR, our overall revenue was negatively affected by softer ad hoc sales and previously churned clients.
This revenue mix, of course, also impacts the gross margin because we know that the ad hoc business is delivering a higher gross margin, but like I said before, this change in strategy will impact our net profitability by selling more recurring revenues because at the end of the day, that gives us a more sustainable and more predictable net profitability and revenue over time. We have seen an OpEx decline if you look at the comparability relating to the Swedish cost reduction, but the big impact on the cost reduction will be visible in Q3 and Q4. The main changes are, like I said before, the U.K., Swedish organization, and the Swedish lease, and the Swedish headquarter. Unfortunately, the adjusted EBITDA cap, less CapEx, is negative for this quarter, and of course, we're not happy with that.
Our aim is, of course, to push even more for ad hoc sales, but again, constantly be on par with the strategy that we have planned out and mapped out, which is driving more sustainable ARR sales over time. The outlook for the second half of this year is that we, of course, are going to continue to see momentum in our growth focus on the sales side and especially on the ARR side. We are going to continue to push for that. We are also going to hire, then there will be new salespeople and more marketing activities going on now in Q3 and Q4. That will help and support our aim to put some pressure on our growth ambitions. You will also see a full impact of the personnel cost reductions.
Of course, $19 million in total and then $3 million on the relocation of the headquarters in Sweden. All in all, $22 million in savings to mitigate and meet the churn we have seen over time, but of course, also to put together an organization that is better suited to fit into the strategy that we have laid out. It is both kind of a cost reduction, but it is definitely more of a transformation than just a pure cost reduction. We have still hired new people. We have still made that kind of competence change in the organization to have an organization that is better prepared to sell our ARR, deliver on ARR, but also deliver on high-end consultancy.
Higher earnings quality and predictability is, of course, what we are aiming for, but the softer ad hoc market is still the caveat when it comes to the second half of this year in what way and how that will limit our ability to exceed last year's $4.3 million adjusted EBITDA CapEx. That is the caveat and the red flag, but it is still something that we are going to work with and try to compensate for as much as possible and push for the recurring revenue and, of course, the ad hoc projects. That was my 15 minutes when it comes to giving you all a full overview of the report. The report is sent out, so I hope we can go right into the questions and answers, and I also have some good questions that we can have a discussion about.
Please, I am handing it over to you guys for questions and answers.
If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speaker for any written questions and closing comments.
I have some questions on the feed. I think I see them. Yeah. There is someone asking, are all the costs for the Swedish reorg taken in Q2, including the CFO payoff? Yes, they are. That is already taken care of, but the full impact on the P&L will, of course, be seen in the later part of the year. Did you adjust any cost related to that the CFO did step down? That is already taken into the Q2 number, so that is already taken care of. I don't really see any more questions than these few questions. I hope that we gave you the information that you were looking for, and thank you all for listening in. You are more than welcome to reach out to our investor relation contact or to me directly.
My email and phone number are in the presentations or in the report, so I'm happy to take questions and hope we can have a kind of an ongoing dialogue. Thanks a lot for listening in, and talk to you in a quarter again or before. Thank you very much.