Welcome to Vitec Software Group Q2 2026 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 pound key five on their telephone keypad. I will hand the conference over to CEO Olle Backman and IR Patrik Fransson. Please go ahead.
Thank you, a warm welcome to everyone attending this conference call today. I'm Patrik Fransson, Head of Investor Relations at Vitec Software Group, and with me is our CEO, Olle Backman. First, we will give a short overview of Vitec Group followed by comments on our report released early this morning. After the presentation, we will, as always, open up for questions. Olle, with that, hand over to you.
Thank you, Patrik, a warm welcome as well from my side. We will just jump ahead, as Patrik said, into the report. This is us, Olle and Patrik, your hosts for the day. Just taking the Vitec in brief picture, as we always do. 27,500 business-to-business customers, we're serving that at the moment. We do that through the 49 business units or companies that we have. Feet on the ground still in 13 countries. All in all, we have sales in over 60 countries by now. The pro forma sales, roughly SEK 3.7 billion. 85% of that is recurring revenue, which is an important part of our business model. To my aid, I have the benefit of having 1,870 colleagues by now. You can see the sales distribution there on the right, we will get back to that.
Talking about sales distribution, we have a really broad exposure, what we like to say, a very limited dependency. You can see the largest customer business units of the total, it's just 8%. Of course, the 10 largest customers only account for 7% of the total sales. That gives us a great risk distribution in that sense. Also on the geographical markets, you can see down there, they're quite evenly distributed, 25% in Sweden, 24% roughly in Finland, 14% in the Netherlands, and so forth. Good distribution, this is also something we normally look for and really appreciate in the M&A investigations that we do is to search for companies that have a similar good risk distribution. Talking about growth, how we do that, we call that the responsible growth path.
What we look for when we acquire companies is of course that they are vertical software companies, that they are established and profitable to start with, that they own their own software, the IP rights, so they have a proprietary software, and they have a business model based on recurring revenue. Then if they are successful, we continue to really nourish that business model, making them market leaders if they are not already market leaders when they come into the group. Then we further develop that through the decentralized organization. We look very closely and monitor product investments. Of course, we don't just invest for the fun of it. We invest in future growth, in the organic growth.
Going forward then being a perpetual owner, we continuously develop our companies in order to make these small but nice incremental steps all the time to continue on the growth path. Talking about acquisitions, this is the four latest ones. So two for last year and two earlier on this year. We did not conclude any acquisition during Q2, but we finished two really nice one in Q1, Dutch Autonet and then Swedish Infometric. You can see on the bars there that in total that these two have a combined sales of over roughly SEK 190 million added to the group. When we look at the different verticals that we serve, we have a great variety of those, roughly 22 different verticals.
You can see the top five ones there in percentage, Property Management being the biggest one with 18%, followed by the Auto industry for 15%, and then Healthcare and Welfare sector of 11%, and then we have Energy and Utilities, 8%, Bank finance, roughly 9%, and then it goes on. In these bubbles, we can have sometimes just one business unit, or we can have multiple business units in multiple countries as well. Talking about the business units, this is a chart that we have shown you a lot of times before. So there's basically no news here apart from the fact that, of course, it has also been amended for Enova and BidTheatre on the new way of accounting for their revenue according to the agent principle. So Enova is in this bar here, roughly SEK 100 million, and it used to be roughly SEK 300 million.
BidTheatre is roughly SEK 36 million, and it used to be roughly SEK 150 million earlier on. But you can read more about that in the report. One big part and a big benefit of being part of a purely software-focused group is the shared knowledge, which really contributes to the success and just keeps on getting better and better with size. Here we gather forums internally, where we share knowledge, we share successes, we share failures. It's also a great catalyst for spreading good or best practice or good practice across the group, and especially, of course, with AI coming in here at a great speed, we can really have these good examples. So what has been used? What worked? What did not work? What were the experiences? How did the customers react? How did the internal organization react, and so forth?
We have lots of these different forums. Usually two to three times a year, just over Microsoft Teams, and sometimes they meet up physically as well just to further share the knowledge and making it easier to reach out across the business unit. a great benefit across the group here. Talking about AI, I mentioned some on the report here. There are lots of things going on at the moment. At this time of year, we have just concluded the strategy sessions for each of the business units. We do that throughout May and June. It has been super encouraging to really learn and see what's in the pipeline, what they have already done, how far they have come, or some of them are on the more early stages, but everyone is doing something. It could be internally.
It could be both internally and in the customer applications as well. We firmly believe that it is a deep learning here and goes just faster and faster. The value proposition are broadening the scope, what we deliver to the customers. Things that previously might have been out of scope or too expensive or taken too much time, that is now more feasible for us, so we can really improve the scope and in parallel, of course, our internal efficiency in doing so. We firmly believe that the combination here of course, domain knowledge, proprietary data, and just the skill set and the deep cooperation that we have with our customers really underpins this market position that we have and the competitive advantages that goes with that. We have a few examples here.
If you take a very broad ERP-like system, which we have in Vitec Fastighet in the PropTech sector here in Sweden. Already two years back, they have been really focused on AI, what that can do for us, starting off internally and then also widening that to the customer side. Nowadays, we have quite a few agentic ready. It's more of an ecosystem, so it's really going from a system of records to an ecosystem with a system of records in that sense. We have language support. We have ways of publishing text. We have AI assistance in customer support, both at our customer side and also our own customer support, of course, internally really enhancing that. Same goes for Vitec Acute, which is in the healthcare sector. It's really all about continued automation of the clinical documentation within the health sector.
Of course, here, really combined with compliance and security. Vitec Tietomitta, another Finnish company within the waste management. It's also very business critical, system critical for our customers that this works. We really are on the brink of releasing a brand-new version. That version has really been fast-forwarded a lot given the AI applications that we have done. That's more internally still. Vitec Energy, which is a very domain-specific and very pointy products for automating better forecasts. Both the quality of the forecast, but also the way that we can harness more and more different forecasting models, drawing out the best conclusions from that and delivering it to our customers with the benefit and help of AI. That was a few examples of what we're doing in that field. Moving over to the numbers.
The highlights for the quarter, I really think that, of course, the continued growth in sales and 15% in total. Roughly 4% of that, just over 4% organically, 11% growth in the subscriptions, 20% growth in the transactional software revenues. This is after we have recalculated everything according to the Agentic method. It proves that there are a multiple of business units that have these revenue streams. It is kind of a sign that it is a good momentum in the economy, in the fields that they are operating in. Especially here, we can mention the real estate agents that have quite a big portion and always have, as long as we have owned them for over 15 years now. Part of that revenue is transaction-driven, and there's a good momentum in that market.
There is a vast amount of business units that are all contributing to that 21% growth in transaction revenues. Of course, the cash EBIT, which is our internal metric, very close to the cash flow. 18% growth and 1 percentage point up on the margin from 2024 to 2025. It's really encouraging to see. Talking about cash flow, all according to plan, really. This is highly what is expected. As you all remember, we have basically all the year's cash flow in Q1, which is a fantastic model, and we're super happy with that. The rest of the three quarters are fairly even as a total. It's really perfectly in line with expectations and slightly better than last year. If you continue to the growth, this is growth in total sales.
You can see the bars there by quarter or by year and also rolling 12 months there. If you take the 10-year average growth there, it is 19%, which is, of course, super strong. This year so far, we are at 15% after six months. More importantly is, of course, the growth in profits here. This is the EBITA result. You can see the increase in both margin in absolute terms and also margin-wise for the quarter. Growth here over the 10-year period has been 24%. The cash EBIT, our internal metric here. As I mentioned on the quarter here, 1 percentage up on margin from 2024 to 2025, and increase also in absolute terms, of course, actually making it one of our absolutely best quarters in terms of cash EBIT performance.
The organic growth, important, like I mentioned, we divide that by subscription, which is the maintenance revenues, the SaaS fees, and the hosting fees that grew 4% or 4.4% actually in the quarter. Just under the mark there, 4.4%. Also in line with expectations. We are seeing less of a tailwind from price increases than last year, just due to the fact that they are usually CPI linked, and that has roughly gone through by now. You can see there the 21% growth in transactional revenues. To just sum things up, it's been a fairly okay to strong quarter, I would say. We're happy with the results all the way through. It's really very much according to plan, I should say.
Like I mentioned in my text on the CEO comments for the report, we are seeing some light in the tunnel in some of our business units. There is more activity today. When you contact a customer, you can get a meeting within a week or two rather than, okay, don't call me. I will call you in three months' time. These kind of effects, we haven't yet seen it in the revenues, but we're for sure building up order book and the momentum for the next few quarters ahead. We're cautiously optimistic on that side, and the same goes for the M&A environment. More things to look at, more dialogue on the way. We haven't closed anything yet, but as usual, we use the same criteria. We are very consequent and around the valuation multiples what we think a nice VMS company should be valued at.
Hopefully, we will be able to deliver something on the M&A as well. Always using the same characteristics and roughly the same multiples as before because we think that it has served us well in the past, and it will serve us well here in the future. With that, I think we will open up for questions.
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 Predrag Savinovic from DNB Carnegie. Please go ahead.
Hi, good morning, and thanks for taking my questions. If we can start by discussing the outlook commentary a bit more in-depth, where you state you see improving business climates. Could you discuss in which areas overall, or are you agreeing to the comment that it sounds like the demand is increasing? Ideally, if you could potentially translate this into organic growth numbers, maybe even.
Yeah, I can elaborate a bit on where we see that. We have seen that across, like I said, the healthcare sector and the public sector, that has been an increased demand in that space. That is, of course, always not so dependent directly on the general economy, but nevertheless, they are picking up. In that sense, we also have seen it in the PropTech or real estate sector as two good examples there. Then, of course, also in the real estate agent sector. All these three have been really picking up, like I said. We haven't yet seen it in the actual revenues. Like I said, it's more the fact that earlier on this year and all throughout last year, it was more like, yeah, it's interesting.
We can discuss it, but we can do that in the next three months or six months or something. Now you get into the meetings, you get into the dialogue, and also in some cases, we've actually been able to sign a few orders as well. That's really encouraging. As I said, also, it's not across all of the business units, but for certainly in those three areas, it is picking up and that's really encouraging to see.
That's very good. Basically, there could be some lag before we see this in the reported organic numbers, but perhaps towards the year you can see even further improved growth rates due to this better climate you see now.
Yeah, for sure. There is a lag here. If we're signing orders today, there is an implementation. That's the beauty of it. We are delivering mission-critical, quite complex system. It shouldn't be easy either to just put them in or to take them out. It's built into the business here. There is, for sure, a lag, but it is encouraging nevertheless that we are in dialogue. We have signed more orders now than the earlier parts of the year and all through last year.
Yeah. Okay. Very good. Then in terms of the improved organic growth on the transaction revenue side, previously it was more tilted to Enova, but now within your reporting it's more balanced. Could you elaborate on the growth in the overall transaction space, which areas you see driving that?
Mm-hmm. Yeah. It's actually a lot of the same areas that I discussed that we have seen. We usually see activity in our existing customers, for instance, in the real estate agent sector, that has quite a large portion, which is driven by transaction. Especially in Norway, where we have had tremendous success, and there is a really good momentum in the real estate market. I think they grew their transaction based over 30% quarter-over-quarter. That's one. Then it's more of the fact that we have had this kind of revenue all year, but it has just been sort of muted a bit by Enova and BidTheatre being so large. But at the same time, Enova is actually quite flat on comparison numbers, a bit better on the quarter. Q1 was a bit lower, Q2 was a bit better.
If you take BidTheatre, they are growing really healthy and good. There's more advertising spend in our customers, which then drives that revenue.
Okay. Then finally from me on the pro forma organic growth on the recurring side, around 7%. How sustainable is this growth, in your opinion? This growth number being more representative of say for the end of this year and next year, given what you also see in the overall market trends improving.
The pro forma, that is, of course, six months of this year and the six months of last year. The pricing component will go down a bit in that as well, because we are at roughly 1%- 1.5% lower in terms of pricing tailwind. That leaves it at the number of roughly 5%- 6%, where we have seen over the years that that has been a fairly normal number for us to be trading at. I would expect it to go down perhaps 1 percentage point or something like that. Roughly 5%- 6% going forward.
Okay. Very good. Thank you very much.
The next question comes from Thomas Nilsson from Nordea. Please go ahead.
Thank you for taking my question. Perhaps if you could discuss what you're seeing at the forefront of AI developments. Are you seeing any form of new competitors emerging in your niche markets? Are you seeing any changes in customer churn caused by new entrants in your niche markets?
We haven't really seen any customer churn just on the basis of AI yet. Yes, we have a churn, as everyone else, but not deliberately on the fact that a specific new entrance just because of AI. No. Of course, whenever we have more and more startups coming in in certain sectors, and I would say in bank finance and real estate, they are for sure very active. They are usually very niched. If you're the sort of ERP provider, if you are the system of records In that sense, we're not seeing, but we are seeing more on the peripherals, on the smaller modules customers coming up. On the other side, that's also where we are also experiencing most of our own AI development at the moment that we can offer to our customers.
We are seeing the demands, we are talking to the customers, and of course, we're also seeing what the competitors are doing. That is just an easier and faster step. You don't rewrite an entire ERP system that easily, and for sure you don't exchange it. That is a bit what I said earlier on. It is sort of built into it that these are very slow-moving things, and they should be. That's why they are mission critical.
Okay. A final question from me in terms of AI monetization. Do you have any concrete examples of AI features that you've found customers being willing to pay for? When do you think at Vitec that AI could make a measurable contribution to organic growth?
I think by going forward, basically everything that we develop now is somehow linked to AI. If I mean new features, new modules, because that has been fueling the organic growth. If you have super high market shares that many of our business units have, you already have the system of records. The way we have grown is through more and more modules, more functionality, and that will for sure be driven by AI, or if it's not produced by AI, which everything is today, it will be an AI application in itself. That will just be a natural step of what we do that's just super natural for us in that sense. Yeah, in some cases, of course, if you come with new functionalities, customers are willing to pay for it.
If you just exchange a current module that is doing one thing with a more efficient one that is doing something, that has previously been really hard to charge for. In this case, if you can prove to your customer that by using this, for instance, some Agentic function, their processes becomes more easy, they can save money on it. You have a possibility to have a dialogue around, okay, what is the customer value and what part of that should we be rewarded for?
Okay. Thank you very much.
The next question comes from Daniel Thorsson from ABG Sundal Collier. Please go ahead.
Yes, thank you very much. First one on M&A. You mentioned increased activity, but also no acquisitions in Q2. Are sellers more keen to meet at lower multiples as seen in public markets, or is there anything else behind the increased activity you mentioned?
What we've seen so far is just the volume, really. Quite interestingly, there is volume of a bit bigger targets, by our standards, I should say. Some of the larger targets and also a lot of smaller add-ons. Still that mid-layer, the sort of what we call usual size, the SEK 40 million, SEK 50 million, SEK 60 million company sizes. They are more still absent and far and few in between because they are usually founder-led still, and they are a bit cautious, waiting. Okay, how will this pan out? They are usually not in a hurry either. The slightly bigger targets, they usually have some sort of institutional or private equity co-ownership. Of course, they need to turn around their assets every now and then. I think that is a lot of what I've seen, and really hard to say.
We are really not driving the prices upwards anyway, we are still losing more than we're winning because we really firmly believe that we will put a fair value on this asset, and if someone is willing to pay some crazy multiples, that's up to them. I can't justify that. Hopefully, we will be able to meet up. Like I said, we've done two really nice acquisitions so far this year, and we did two just the entire last year, and we still have six months to go. For sure, we are in a lot of dialogues, but we're not going to go crazy and still be very disciplined around the multiples.
Okay, that's helpful. Also, do you see any regional differences in terms of M&A activity? Also, are you looking outside your current markets to find new targets?
Well, actually, the hunting ground is Europe. Yeah, we are for sure looking outside our current markets, yes. Naturally, we are less well-known outside where we already are. Europe is a big place. Here in the Nordics, we are pretty well-known, and I should say we probably get to look at not everything, but most of the things that are active here. It is for sure a lot around the more continental Europe.
Okay, interesting. Final question here, more technical. You have had a tax rate of 26%, both in Q1 and Q2, higher than I had both quarters and also higher than historically. Is there anything making this structurally higher also going forward that is good to have in mind?
Not really. It's more just the fact that we are tilting more and more of the profits outside of Sweden. In Sweden, we have fairly low corporate tax rates. Both in the Netherlands, Belgium, Poland, and so forth, it is higher tax rates for companies. It's just an adoption to the fact where we are earning the money.
Okay, that's fair. The current level is better for the future, I guess.
Yeah. I always say that the current quarter is the best proxy for the mix going forward.
Excellent. 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 Fredrik Nilsson from Redeye. Please go ahead.
Thank you. Hi, Olle and Patrik. I wonder regarding your customers. Last quarter, you mentioned that many customers are still quite cautious regarding AI and new features, yet you seem to invest quite a bit on those. Have you seen any change in how customers view AI and your new features over the last few months?
Yeah, for sure. It is, of course, on everyone's agenda and also our customers. The fact that these industries are quite conservative, I think that both the customers have come to the point, okay, we really need to address this. Then you usually go to your existing vendor and say, okay, what are your thoughts? How are you thinking? What is in your product pipeline? and so forth. Yeah, for sure, we are in more active dialogues, and they want to hear what we are doing. At the same time, I think I said that last time as well, they want to know that they will benefit from whatever comes out, but they don't want to make a total change of anything. It's in their processes. It's a bit of both.
They are really interested and keen on learning more, what we can help them with, and usually taking the small pieces, not doing everything at once. That's still the picture. Yeah, for sure, there's more interests, more openness, and willingness to try as well. They usually do pilots and things like that. We have lots of that ongoing at the moment.
Okay, I see. Regarding the improvement in order book and momentum in general, as you mentioned, you have a high market share in most of your segments. Could you elaborate a bit what kind of things are the customers looking for? Or is it that you have managed to find new customers, or how should we interpret that?
I would say as an overall comment on that, it is our existing customers that we're working on because we have that deep domain knowledge with us, so we understand the processes that they want to become more efficient on, and then we try to embed that into our product pipeline and into our functionalities. It's really more and more about making our customers more efficient. I think with Vitec Acute, for instance, in the Healthcare sector, which I mentioned earlier, it's all about automating the processes around the clinical documentation. Of course, that is the core workflow of the customer. At the same time, there's a lot of regulations, there is a lot of security embedded into it, so you don't just switch something to a new feature directly.
It really needs to be tested, it needs to be validated, and then it needs to be implemented in vast organizations that are perhaps not too keen on changing all of the time. There is a lag. Everything doesn't move as quickly as you might think, for sure, it is just going in one direction in that sense.
Great. That's all for me. Thank you very much.
Thanks.
The next question comes from Patrik Schwartz from Pareto Securities. Please go ahead.
Hello. Just a few questions from my side. First, here on the organic subscription growth, there was a slight step down here compared to last quarter. I think you mentioned here 1%- 1.5% lower price tailwinds. Could you just go over the bridge here compared to last quarter, and exactly how much right now is price compared to volume on the subscription side?
When we have churn, we usually have that in the first quarter, and then we have the price increases going through also in the first quarter, usually. We haven't really signed any new logos or any increased, like I mentioned in both the Q1 report and the increased market activity that we've seen now that has some sort of filtered through in the books. It's more very steady state. Half of this, it's roughly 4.4% to be precise in the organic growth for the quarter on the subscription part here. 2%- 2.5% would be price, the rest would be new sales. It's really nothing out of the ordinary that we think and, yeah. There's no one single thing. It's more just, okay, it's been really slow. We haven't added anything really new, and then the pricing is there.
Okay. That's fair. Then on the cost side, organically, of course, last year you didn't add any new employees net, if you adjust for acquisitions. Is that a fair assumption for the rest of the year? Also, how are the salary raises expected to be throughout the year?
Yeah. Salary raises has usually been concluded now, the last ones in Q2. Overall, I think we landed on average now across the different countries on 3.5%, roughly. Personnel being by far the biggest cost that we have, and the rest is premises, and they usually follow indexes, and they would be 1.5%- 2%, something like that. I think we have a good cost control. Also just the fact that all the business units are really careful in recruiting. I think overall net, I think we were 10 or 12 more employees than we were, so organically, which is 0.7% or what is it, compared to 1,900 employees, really. It's been very low organically.
At the same time, those who are supposed to grow according to their strategy plans, we have a lot of companies that are really accelerating now, and of course, they should hire more people. Then we will see going forward, I don't really expect it to go down, but I think that we will probably be here around net- zero on the employees.
As you mentioned previously, with the increased demand that you saw here in the second quarter, you kind of expect to be able to meet that demand towards the end of the year with fairly flattish employee development, I assume, and fairly flattish cost development?
Yeah. That's the expectation because the sales efforts have been done, and then the rollout, like I mentioned, we can't do that. It doesn't really accelerate that fast because these are mission-critical, complex systems, as I mentioned, and they do take time to implement. For sure, yeah, now we are expecting to be able to cope with this level. Should things really boom and become super good, we don't see that at the moment, but, if it continues like this and the slight increase, we can for sure handle it with the organization that we have today.
Okay. Then just a final question. You more or less already answered this to some degree earlier. On the transaction side, of course, even with the new accounting standards, Enova still is fairly strong in the second quarter and the third quarter. Organically, transactions were up 15%. How much was underlying if you remove that, if you remove Enova, from that figure?
It will roughly be there around the 15%-20% anyway, because Enova was actually quite flat. A bit increase in Q2, but in the first six months, it was kind of flat. It was basically.
Okay.
All of the others that contribute to that.
Is it also then some easier comparatives?
Yeah, like.
Which, of course, Q2 last year was very weak.
For sure. It is a sign of an increased pace in economy and an increased activity in the customer side, because that is what is driving the transactional-based volume. That's one thing. The other is, of course, as well, if you have sold your ERP system to a customer and you want to grow and you want to become a more important and integrated vendor, we then start selling more and more modules. Some of those modules are transactional based. It's also an effect of the fact that we continue to grow with our customers. If you've already sold an ERP system, you're not going to sell another one to the same customer, but you can sell more modules, and some of those modules will have a transactional fee.
Okay. Thank you. That was all from me.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Well, thank you for interesting questions and great interest in the Vitec report. By this, we conclude this conference call, and I wish you all a pleasant summer. Thank you.