Earnings call transcript: Exsitec Q2 2025 shows software revenue boost

Exsitec Holding AB reported Q2 2025 earnings, showcasing robust 28% year-over-year growth in net recurring software revenue, which drove an 8% increase in overall net sales (10% fixed currency) and SEK 44 million in adjusted EBITDA. Despite a -2% organic growth rate and persistent passive sentiment among existing customers, the company's stock saw a modest 0.37% pre-market uptick, supported by improved Norwegian EBITA margins and a strong Q2 order intake, particularly from new sales in Sweden. Management emphasized a strategic focus on sales execution and operational excellence to achieve its 15% annual growth targets, with analysts viewing the stock as undervalued.

Analysis

Exsitec Holding AB's Q2 2025 results present a mixed but strategically coherent picture, defined by acquisition-led growth and operational challenges. Net sales grew 8% (10% in fixed currency), primarily driven by a robust 28% year-over-year increase in net recurring software revenue, which now comprises a significant 24% of total revenues. This shift towards a higher-quality revenue stream is a key positive. However, the company reported negative organic growth of -2%, directly attributed to what management terms a "passive customer sentiment," with existing clients delaying smaller projects. This is a critical headwind, as 80-85% of professional services revenue stems from this base. Geographically, performance varied: the core Swedish segment saw 11% sales growth but a decline in EBITA margin to 24% from 27% due to lower efficiency. Conversely, Norway demonstrated significant operational improvement, with its EBITA margin more than doubling from 5% to 11% despite a sales decline. A strong leading indicator is the 40% surge in order intake, driven by new customer wins in Sweden, which underpins the company's strategic pivot towards aggressive new sales execution to counteract the passivity of its installed base. The market's cautiously optimistic reaction, reflected in a modest pre-market stock increase and analyst upgrades, aligns with this balance of strong forward-looking orders against current organic weakness.

Key Decisions for Investors

• Investors should weigh the high-quality 28% growth in recurring software revenue against the persistent negative organic growth (-2%) from the existing customer base, as the company's valuation hinges on this transition.
• Monitor the conversion of the strong 40% YoY order intake into positive organic revenue growth in the next two quarters, as this will be the key indicator of whether the new sales strategy is successfully offsetting the weakness in professional services.
• Consider the operational leverage potential, highlighted by Norway's EBITA margin doubling to 11%, but remain cautious of the margin pressure in the larger Swedish segment, which could cap overall profitability improvement.
• Given that analysts are revising earnings upwards and the company's stated financial goals include 15% annual growth, the current stock price could represent an opportunity, contingent on management's execution on new sales and operational efficiency.