Admicom Oyj (ADMCM) Earnings Call Transcript & Summary

Welcome to Admicom's Q1 2025 Interim Report webcast. My name is Simo Leisti. I'm the Group CEO of Admicom, and this is my pleasure to be with you now after my full first quarter with the company. And I'm also here joined by Satu Helamo, our Group CFO, with me today. And first of all, it's great to have all of you here, and you have questions and answer ability in the webcast. Just press the send a question button and it will guide you to asking questions. So at any time, please post questions, and we will have plenty of time for Q&A in the end of the presentation. And for Admicom, Q1 was a little bit of a kind of like a mixed quarter. We had good sales performance. We had good progress with our strategy planning and our execution plan development. But at the same time, the market was quite challenging for our customers, which was visible in the high number of insolvencies, actually very high number. And also, we saw that even though the market was starting to pick up based on the construction volumes, we only saw a very slight positive increase in the volumes overall. Our financials came out pretty much as we planned, and Satu will go through those in more detail, how the Q1 turned out for our business. And here's the agenda. I will first describe a few significant customer cases from Q1. I will give you a little bit more color to our strategy execution plans, how they have been evolving. And then Satu will guide you through our Q1 financial results and also remind you of our financial outlook for this year. And then we will have time for Q&A, like I said, please do send questions as we move along and then we'll have time for Q&As then in the end. And I will pick up the questions from the messages that you sent out. First, let's start with the customers. That's what we're here for. And we had an exciting Q1 in terms of significant customer cases. And I'm highlighting the ones that we saw as the most representative of the Admicom strategy as we move forward. Overall, we had a good new customer intake. We got about 130 new customers in and through insolvencies, we had more than 100 customers leaving. So as a net effect, our customer number grew during the Q1. But just to highlight a few important customers and why they are representative of our strategy. Ralf Ajalin is a customer who has been a long-term customer of ours in the estimation and planning side of our platform, but now they also wanted to onboard into our Ultima ERP platform. And the reason was that they wanted to have a single platform for combining both the project planning capabilities and the financial results so that they're all in one platform, and they're able to get the full picture of their performance and operations from that platform. Another important aspect of our strategy is that how we are able to broaden our footprint of our product penetration with the customers. And there, we had 2 great examples from Respect Talotec, where they have been a user of multiple of our tools, and now they are currently users of Vision in terms of the documentation solution tempo in the scheduling and also now Ultima as the ERP. And also Rakennus Grahn is a great example of ours where the customer truly believes in Admicom's ability to support their business with a very holistic platform approach where they are currently users of our estimation tools, of our scheduling and planning tools, of our documentation tools, and also, they have been now onboarding into our AI pilot customer program. And also, they were among first ones in Finland to start onboarding Bauhub for the project coordination as well. So they are truly onboarding our journey in terms of supporting the customers holistically across their construction project life cycle. Then we also have some interesting other opportunities. Trackinno has been in our portfolio for more than a year now, and they are supporting mobile equipment, mobile asset management, tracking and managing asset maintenance, life cycles and also supporting mobile work in the field. And we were able to win a public tender for [indiscernible], Liikenne Oy, which is one of the public transport companies in helping them to manage their track infrastructure and also their mobile assets and their life cycle plus their mobile work in the field. This was a very significant order for us in Trackinno business, and we were very happy to have in a way, a very broad implementation of Trackinno to help them to manage their assets in their business. And also, we got an interesting customer from NRC Group where they had their existing estimation tool was going end of life, and they made a public tender or they made like a tendering process in selecting a new estimation tool and also we were participating in that competition. And it was a great example of our ability to win in a very open tender environment, and we were able to win that deal from NRC Group, and they will be now onboarding into our estimation tool. And also JM is a cooperation that has been starting well. We are working with them in multiple fields of our platform, and we are supporting them in rolling out those capabilities across their Nordic operations. So a great example of our international customer base expanding. So broadening the portfolio use to give and provide more customer value, first Bauhub customers in Finland, some larger deployments of our platforms like with the Trackinno example and then, of course, having major international customers onboarded as well. Good representation of our strategy in action from the customer perspective. Also speaking of customers, we had a great event in bringing together Nordic and first of all -- in the first year, Finnish construction customers and ecosystem players to discuss about what will create the success for the next 20 years of construction industry. And this is where Admicom really wants to be one of the leaders of the change in the industry overall, how digitalization, use of data, use of AI will help construction industry to challenge the conventions that we have today and how we're able to facilitate the conversation among the customers and the ecosystem members. It was a great event. We brought around 300 people across the construction industry ecosystem. Together we were able to facilitate a nice conversation among the participants around the topics of digitalization, AI, we were able to present some great demonstrations of our technologies and capabilities, and we're planning on having this as an annual event, helping the construction industry to come together and discuss about the future of the industry, the changes that we want to introduce there and how we can together make construction business more productive and help each other to build better together. Then a few words about the strategy execution. As I laid out in the last Q4 release webcast, I have been working on a plan of a 60-day planning cycle, and now we're able to start to describe what changes are we introducing in our strategy execution and in our operating model to support the accelerated growth phase of our strategy. First of all, our vision is unchanged. We want to be the first choice of partner in the European construction software ecosystem. We really want to be the ones leading the whole industry productivity improvements and bring new digital capabilities for our customers across international markets in Europe. Our mission is put into the form of a North Star, where we have the 5 key star kind of like edges where we define what we want to do by 2030. So first of all, we want to make our customers successful in increasing their productivity by approximately 25% compared to peers not leveraging our capabilities in their business. We want to make it work so that it's done by a comprehensive digital platform, which is AI-enabled and it gives the capabilities the customers need to support their overall construction project life cycle. We want to provide it so that it is delivered through a superior customer experience. We know that the construction industry is very, very critical of the ease of use of technologies because the conditions in which our users are using the technology are typically not very suitable for having a small device or a laptop out there, but it needs to be delivered in a way that it's most seamless and easy to use. And also, we're focusing on making sure that our employee experience is also superior and supporting us to be able to deliver a great customer experience. So those two go very much hand in hand. We also want to internationalize our footprint, and I will describe a little bit what we're doing in that area, but the example of the JM customer is a good one in terms of our ability to support international customers and also help us to become represented in multiple different markets and help us to grow our overall addressable market. And of course, we want to become the best place to work for people who love the construction industry and who love the digital platforms and use of those. So Admicom should be the best place to work for those individuals having the love for those 2 areas. And our mission is to help our customers to build better, and we do it together by bringing together the ecosystem partners and the customers and the Admicomians to create new ways of working and challenge the conventions. And through this, we are aiming towards growing our business to a level of EUR 100 million ARR by 2030, and it's a combination of organic and inorganic growth that we're aiming towards. So this is our mission in brief. And of course, in order to differentiate in the market and bring those new capabilities, we are ready to invest in developing new technologies to support the construction industry productivity improvements. During Q1, we launched a EUR 2.4 million research project that aims in researching and finding those most prominent use cases for AI and the use of data in the construction industry. We do it together with our customers and with the academia in terms of research work packages, and also we were able to get EUR 1 million grant from Business Finland to support this initiative. And this is important for our competitive differentiation for enabling us to build the right capabilities in the future to our platform, but also to be able to differentiate internationally with our capabilities and how we are able to embed AI into our platform. We also launched now a new operating model, and this is one of the key outcomes of the 60-day planning that I was leading when joining the company. And the key highlights of the change in the operating model is that how we are able to turn our focus from being, let's say, very product-centric. We used to have a business unit model which was built around our products, how we're able to turn that into a more customer-centric operating model. So the customer centricity is in the core of our new operating model. We also want to make sure that we have a high level of operational excellence so that we are able to create more simplified operating model for more quick decision-making and being able to have a higher organizational clock speed as we move forward. And the key principles of the operating model is that how we're able to reallocate our resources to the places which are enabling us to move into this accelerated growth phase. One important being the growth operations where we're allocating a lot more resources in an integrated, efficient growth operations that comprise of our salespeople, of our customer success operations and our marketing, working together to make sure that we have an aligned and effective growth operations supporting our growth initiatives. So this is all about capturing new sales opportunities from the market. It's about enabling more effective cross-sells in our existing customer base, and it's also about being more proactive in mitigating voluntary churn. Simplified operating model is also visible in our platform operations where we used to have business units comprising of different kinds of product management and product development roles. Now we're moving into operating model where we have one product management organization working, aligned across our portfolio capabilities, making sure that the portfolio is supporting customers' workflow in an optimal way and improving the customer and user experience of our platform as well. We're bringing together also our product development, people under one product development organization to make sure that we are able to shift our R&D and product development resources to the places where it makes the most value and where we can drive the most impact into our customers' productivity. We're also bringing our accounting service into a new position in the operating model, where it's reporting directly to me, and we're starting to investigate for more value-add services in the accounting service, where we can also, through our expertise in the financial management and payroll management and other aspects of the service, how we're able to tap that into the ability to support the increase of the productivity, be more proactive in our services and in being more consultative to our customers and also to investigate potential new value-add services that we can also bring to our customers to build better. And of course, we need to evolve and mature our internal operations. So we have a function within the business enablers where we have the internal functions who are enabling us to operate effectively. We have there the finance, our people operations. We have our IT and so on. So of course, there, we want to develop the processes that are needed to effectively support our business, create more automation, also internally, our operations and have development of our processes, systems and our data, what we can internally share for our business to better lead the business and make better decisions based on the insights that we can get from our business systems. And then when it comes to leadership, we are simplifying our leadership structure so that we have much more clear roles and responsibilities that helps us then to lead more effectively and also be more accountable for the areas of operations for the whole organization. And to reflect this new operating model, we have the updated leadership team structure where -- I wanted to have a little bit more compressed leadership team where we have more clear roles and responsibilities. So on top of myself and Satu, we have Pekka Pulkkinen, leading this integrated growth operations with much more investment now into the overall growth operations. We have Teemu Uusitalo as our Chief Product Officer, leading the product strategy of our portfolio across all products and also leading our product management and product support functions. We have Thomas Raehalme, who is our Chief Technology Officer, leading our product development activities and our R&D in the technology side. And we have our Chief People Officer, Helena Marjokorpi, who is leading, of course, our people, our culture, our support for the development of our own people in the operating model. And then we have one position open at the moment as our Chief Strategy Officer, which is due to be open for recruitment and to complement our leadership team in terms of helping us to have a continuous strategy process look into our inorganic growth opportunities, start facilitating our M&A funnel and also to help us to find new areas of growth and value creation from our customer industries. And also alongside with the new operating model, we have now 7 critical strategy execution streams that we are aligning ourselves into. And it's focused on the growth acceleration, which means how we are able to turn our new growth operations in being more effective in driving the organic growth, both from a new sales and cross-sales perspective. We have an internationalization execution stream where I have put 2 of our senior leaders to lead our internationalization strategy. So our former documentation business unit leader, Mikko Järvi and our Bauhub CEO, Teet Parts will be leading our internationalization activities. And by the summertime, we should be having more clarity of our internationalization direction and playbook, and then we can start to execute those accordingly. We have the execution stream of the unified platform experience where we are starting to build more and more capabilities where our platform is working seamlessly across the customers' work flows and drive synergies from using multiple technologies in our customers' operations. In the Nordic construction forum, we provided a nice data point around the correlation between the use of our portfolio more broadly and the customers' ability to drive growth in their business. And we are truly confident that the use of technology from our portfolio more broadly allows the customers to operate more effectively, drive more growth and also be more productive and profitable. Also then in terms of our target operating model, there's a lot of things that we need to do from an administrative perspective and from our legal entity structure perspective. So there, we are simplifying our company structures. We're doing mergers of the subsidiaries. And we're, of course, driving the process development and the application landscape of our internal operations. We're also driving a work stream around our equity story and our incentive structure so that when we're looking at the target by the 2030, how we're able to make sure that our incentives and our proposition to our investors are aligned, and we can make sure that we are all driving towards the same outcome and same goal. We also -- through this one Admicom operating model, we have quite a lot of work to be done in the culture side, how we're able to start culturally be more aligned in our growth operations, platform operations and operate as a one team. So there, we have a lot of work to build the winning culture, build the winning teams and foster and develop our talent as we move forward as well. And like I said, in the last execution stream, we're looking into the accounting service, how that can contribute more value to our customers in the future and help us to kind of like drive that target of 25% better productivity. For the ones who are using our platforms and services more broadly, what is the role of the accounting service is in that in the future. And through this, we are driving our execution towards the target state of 2030 and towards our vision. Okay. This was the summary of -- from my side, the key customer cases, a little bit of insights into our strategy execution after I joined the company. And now let's move into the Q1 financials, and I'll hand it over to Satu.

Thank you, Simo. So let's first start with the market environment. So as our report header also says the market continued to be challenging in the first quarter. And even though the revenues in the industry continue to trend to the right direction, the volumes are very, very low and the improvement in the market is very slow. Of course, this is how we expected the market to be, at least in the first half of this year. But what was a little bit surprising for us in the first quarter was that we saw a very significant increase in insolvency-related churn in our customer base compared to Q1 of last year. Regardless of this, the overall sentiment is improving. We are hearing more and more confidence in the discussions that we have with our customers. And obviously, now the latest news about the U.S. tariff policy is creating some new uncertainty in the market. The tariffs do not have a direct impact on our business as such. But obviously, we are carefully monitoring the news and assessing the potential indirect impacts that it may have. Admicom's performance in this market environment has been good throughout the downturn, but there are some obvious impacts on us as well. On top of the insolvency-related churn, we are also seeing prolonged sales cycles, downsell due to workforce reductions, for example. And the pricing of our ERP solution and also our accounting services are based on our customers' revenues. So with the revenues in the industry declining, our fees are also negatively impacted for those customers who are facing a decline in their business. We also have this annual adjustment fee mechanism in our ERP and accounting side, which means in short, that 5 months after the customer's financial year ends, we review the actual revenue of the customer against the estimated revenue that we have based our billing on. And in case the actual revenue is higher than the estimated, we then are able to charge the customer an annual adjustment fee. And in case the actual revenue is lower than the estimate, then we credit the customer to a certain minimum level. In this market environment, the adjustment fee component is also impacted, and we have reflected this also in our full year guidance. We have estimated that this year, the amount of adjustment fees that we will be able to charge will be approximately EUR 700,000 when they were almost EUR 1.5 million in 2024. In the first quarter, we were quite satisfied with our sales performance. The bookings increased by 10% from Q1 of 2024. March was especially strong in sales, and we were really happy to end the quarter with that kind of a sales result. As Simo already mentioned, also the logos developed positively, but where we are still seeing a little bit difficulties is the average deal size, which is not quite where we would like it to be. This basically means that the bigger deals are still fairly difficult to close. We have discussed quite a bit about our quite vast cross-sales opportunity that we have with our existing customer base. And in the first quarter, we had a couple of percentage points increase in the number of customers who are using more than one of our product. And we believe that the changes that we are now making in our organization and especially in the growth operations, we can further speed up the cross-sales going forward. As mentioned a couple of times already, the insolvency-related churn was really high in the first quarter. Compared to Q1 of 2024, we had actually 70% more churn due to insolvencies. And that was the main driver for our annual recurring revenue to remain flat compared to end of 2024 and also our rolling 12-month churn rate increasing. The profitability was in line with our plans. In the second quarter, we continue the work to allocate our existing resources more effectively according to the new operating model and in order to support our strategy execution. ARR growth was 5.5% compared to Q1 of 2024. But as said, it was basically flat compared to the previous year-end. And the high insolvency-related churn is the biggest driver for us missing our targets for ARR growth. With revenue and recurring revenue growth, we performed pretty much according to our plans. And the reason for that is that the highest spike in churn realized in March, and therefore, it had a larger impact on ARR than on revenue. Adjusted EBITDA was EUR 25.3 million, and that is in line with our plans. Throughout 2024, we were still in our focus for growth investment phase, which means that the investments that we made in that time are now, for the first time, fully included in our cost base. The share of recurring revenue of total revenue continued to increase by 1 percentage point. Now that we have taken the decision to wind down the external software development services, we are seeing this number further declining from a very high level, it has already been in the past. In our key financials, I guess the most attention now goes to the profitability level. So let's discuss that a bit. As a reminder, we have a high -- very high fluctuation between the quarters. Q1 and Q4 are typically the lowest in terms of EBITDA and second and third quarter are the highest. During second and third quarters, we invoiced the majority of the annual adjustment fees. And also during the summer months, the payroll expenses are typically lower due to the holiday season. Compared to Q1 2024, our adjusted EBITDA declined by approximately 5%. And the main driver for that is the investment phase that lasted throughout 2024. And the majority of the investments during that time we have made in sales, product development and product management. At the moment, we are in the middle of the reorganization. And maybe the one single data point that best describes the magnitude of the change that we are doing is the fact that in this organizational change, over 20% of our employees are reallocating inside Admicom or their roles are being redefined so that their efforts can be best utilized in supporting our accelerated growth strategy or portfolio strategy. And Simo just explained the 7 key streams of our strategy execution. And with these organizational changes, we are ensuring that we have enough bandwidth, enough resources, enough expertise around all of these streams. And after the changes, we will be better suited for our accelerating growth phase and we will have also the capability to drive our profitability up again. The headcount increase in the first quarter is quite high, if you take that number without any explanation. So it's good to understand that in this headcount increase, we have a few new roles like the Chief Product Officer, for example. But actually, majority of it relates to the re-resourcing of sales. We said it already in the basis of our 2025 financial guidance that we had some attrition earlier in 2024, and we have now been able to gap those resource declines only in the beginning of 2025. And also, we have had some recruitments in our accounting unit, and these are mainly to replace for longer absences. And actually, the FTE for our accounting has decreased a bit even though the headcount has increased. So maybe that gives a little bit more background on the headcount trend. And next, we have the ARR trend here, which, as said, now has a small decline from the previous quarter. And if we go forward to the ARR bridge, you can see the high churn for 1 quarter compared to previous years. The good progress that we have made in cross sales is showing in the upsell figure. And this quarter, the downsell was mainly caused by our ERP and accounting customers who have continued to somewhat update their contracts to reflect the lower revenue expectations that they have for this year. Our ERP customers are also updating their revenue expectations upwards. And actually, the net impact for ERP for net -- for downsell and upsell was slightly positive in the first quarter. And then finally, if we take a short recap on our financial guidance for 2025, this year, we expect our ARR to grow by 8% to 14%. And the wide range that we have for our ARR expectation relates to the uncertainty that we have with the market improvement and especially the pace of it. Total revenue growth is expected to be within 6% to 11%. And in revenue, we will have a positive inorganic impact from the Bauhub acquisition that we made in December. But for ARR, the growth is purely organic as Bauhub was already included in our ARR calculations at the end of 2024. What hinders our ARR and revenue growth rates this year, obviously, the market, but also the annual adjustment fees are expected to decline by approximately EUR 700,000. And also, we expect about EUR 0.5 million decline in revenue due to the decision to wind down the external software development services that we have had since the Aitio acquisition in 2021. The adjustment fees and also the decline in external software development services revenue, they also have a direct impact on our EBITDA, which we guide to be within 31% and 36%. And our plans to protect the profitability this year are especially related to the decision to reallocate our existing resources. And also, we are continuing to manage our cost base. I think that's all that we had for the presentation section of this webcast. So maybe now we move to the Q&A.

Yes. And it's good to see that we have questions coming in. So I will be also somewhat moderating the questions. First of all, there's a comment regarding the trading statements and their visibility. So we'll look into that comment in our Investor Relations. But let's start with the questions. Atte Riikola from Inderes is asking that how satisfied are you with the progress of the Bauhub integration so far? And what have been the experiences of the first Finnish customers with the product? And I can take that. First of all, I'm very, very satisfied with the integration project that we conducted with the Bauhub team and integrating that into our portfolio. We were able to do the market launch for Bauhub 1 month early, against our own original plans. We have been able to start the customer acquisition. So we have first customers onboarding and they are starting to use the platform. And if I put it this way, that we have received proactive wishes to be customer references for the platform because of the high level of satisfaction with the platform use and the user experience and what capabilities it provides. I think overall, in Finland, there is a typical way of building the construction project so that the one commissioning the project provides certain tools for project documentation and so on. And overall, in the market, there is a sentiment that this is not probably the best approach. And these platforms, that the commissioners are providing, are not the best for enabling the most effective project collaboration and information sharing. So there's a bit of work to be done in defining the optimal project collaboration methods and how we're able to take the project collaboration away from e-mails and away from the telephone calls into a single cloud-based platform. And this is what has happened in Estonia, and this is what we're driving in Finland as well. But the first feedback from the customers has been extremely positive. And also the usability of the platform and the user experience, like I highlighted in the beginning, it has been very, very good. And we believe that through that, we can also drive a lot of product-related growth momentum. Another question from Atte is related to our personnel costs and the number of employees increased in Q1 compared to Q4. And excluding Bauhub, how -- have you been increasing your recruitments? And what do we believe that the personnel expense level will be in the coming quarters? So maybe, Satu, if you can just allude on this a little bit. And also, there's another question related to this from Daniel Lepisto from -- sorry, from Jukka-Pekka Pesonen that how descriptive is the Q1 as a run rate proxy of our overall cost level? So a little bit the same question with different words.

I can take this one, and I believe I pretty much answered the question when going through the financials already. As I said, we have had some additional positions maybe a handful, 3 to 5 -- 5 positions in the first quarter are actually new. All the remaining are pretty much replacements for recruitments that we tried to already do in 2024 or replacements for the accounting services. In our personnel cost base, it's good to remember that in Q1, we have the full personnel cost from Bauhub whereas in Q4, we had only half a month. So that's one explanation for the personnel costs increasing faster than the headcount. We are very careful in our prioritizing our recruitments this year. We have identified some key roles that we need to fill. But at the same time, we have revisited the recruitment plans that we had in our original short-term plan. So I don't see that we would have a significant increase in the personnel costs going forward. So I guess, as a run rate, Q1 is pretty good starting point. And obviously, then there's a big fluctuation with the holidays. And maybe one thing to also remember is that in December, the Christmas -- timing of Christmas was very positive from the employee perspective. So we had very long holidays also in December, which was a little bit decreasing the personnel cost of the last quarter.

Yes. Then also there's a question from Atte related to the Business Finland funding and how we are expecting to recognize this in this coming year.

Yes. So maybe I take this one as well. There's a little bit of -- we still have some internal organizing to do around this project. The reorganization and the operating model changes have a little bit delayed our plans to actually fully kick off the project. Obviously, many streams are already ongoing. In Q1, we have split the funding between P&L and balance sheet. So we have a project -- AI-related project that we have already been capitalizing. So partially, the recognition of the Business Finland funding will go netting the -- or offsetting the balance sheet figure and partially, we are recognizing it as income in our P&L. In the first quarter, there was only like, I think, EUR 20,000 recognized in the P&L, so very insignificant account or amount. And we said -- when we announced the funding and the project, we said it very clearly that we do not expect this to have an impact on our financial guidance. So we will be splitting it between balance sheet and P&L. But at the moment, we don't expect it to impact our profitability significantly.

Great. Then there's a question from Daniel Lepisto from Danske that can you elaborate the comment on average invoicing being below average for the new customers? And does this mean that the Project Management Solutions deals are smaller than usually or smaller than in comparison to Ultima ERP deals? And I could comment this briefly so that we have seen a number of cross-sell opportunities to come in. And typically, when the customers are adding new project management capabilities to their portfolio that the individual transactions or the bookings are relatively small compared to customers who are making a strategic decision to move all of their ERP and accounting services to us. So at the moment, the average deal size is trending a little bit lower than our normal run rate, but we do have also larger opportunities in the pipeline. So this -- in Q1, we just saw a little bit of a lower average deal size than compared to a normal quarter, but this is not a trend that we are expecting to continue for a long time. And we are also putting a lot of emphasis in, especially new sales that we are able to win and make bookings of these larger ERP accounting services and multiple product deals at once where we're aiming towards having a more significant MRR per deal moving forward. But in Q1, we did see that the average deal sizes were a little bit lower than our normal run rate. And there's a few questions about the growth expectations, especially regarding the ARR growth. So how are we expecting the most of the growth to happen? And what is our expectation on the timing? So how confident are we that the growth will accelerate during the year? And maybe, Satu, you can quickly comment on that part.

Yes. So as said in the basis of our guidance, we expect the market improvement to be towards end of the year. And with that, I think it's also our estimation that the ARR growth will accelerate towards end of the year. I think what we are still in progress of planning is, for example, timing of price hikes that we will do this year. We have started to investigate the whole pricing model for Ultima and accounting, for example. So timing of those decisions will probably impact also the ARR growth timing, but we will share more when we have more concrete plans on those.

And then also, Daniel is asking regarding the high number of insolvencies and how is our current visibility on higher-risk accounts and how surprising was the insolvency churn in Q1 from our point of view? And what are we expecting to have for the rest of the year or Q2? And maybe just as a generic comment, what I can tell is that even though like Satu showed that we have some positive -- like plus marks in the numbers of volumes, the changes are very, very small and the market condition remains as a very challenging one for our customers. So there will be still a high number of insolvencies during the beginning of the year. We already know that, that it will be significant in our customer base. And we do believe that the trend should be starting to improve towards the second year half, and we are monitoring more high-risk customers and some indications of the high-risk accounts, but the number of insolvencies still occurring was higher than we anticipated in our original 25-year planning. Do you, Satu, have something to add on that?

Well, not much. Maybe to comment on the visibility of higher risk accounts and the churn prevention in general, the reorganization that we are doing is targeted also for that. So we believe that especially with the voluntary churn, there is still more that we can do in order to have a more positive trend on that. We already saw a small decline in the voluntary, so the non-insolvency-related churn in Q1 compared to Q1 of 2024, but we -- I believe that with our own actions, we can impact that. I think the insolvency part is more difficult. So as Simo said, we expect it to continue relatively high, at least for the first half of the year.

And also, there's a question from Emil from Carnegie that are you gathering feedback from... [Technical Difficulty]

Simo, at least I can't hear you.

Can you hear me now? I, at least, don't have a mute on.

Yes, your voice suddenly -- okay, your's okay. Apparently, it's only me then. Go ahead.

Okay. So there is a question regarding the churn and are we gathering feedback from customers who are leaving Admicom and how confident are we that churn is purely insolvency related? So we do make a quite comprehensive clarification of the churn and the reasoning for the churn, and we do know what are related to insolvencies and what are related to purely voluntary reasons for that. And like Satu mentioned, we did see a declining trend in the voluntary churn, which is a good sign. We're not at yet the level what we're aiming towards in the voluntary churn, but the trend is towards the right direction. And the insolvency-related churn was significantly higher than we anticipated in the planning of the year. And also, there's a question of, is there a need to strengthen the organization further going forward? Currently, most of our planning with the new operating model and the change in our, let's say, in the alignment of the resources is mostly around shifting the focus of our people. And like Satu mentioned, there are a few critical roles that we're still looking into fulfilling, but this is mostly around getting organized around the strategy and how we are able to get the most return on the investments that we have been making during the last year as an example. So it's more about making sure that we have the right roles and responsibilities, the right targets for the people, and they're really impacting into our results in the right way. And like I mentioned, the reallocation of our people and resources has been quite significant so that more than 1/5 of our employees are now shifting to the new operating model role. And then we believe that through that role, they're better positioned to help us to develop our business moving forward. And also, there's a question related to -- specifically to the JM account. There will be a more comprehensive description of the customer case coming out, so more details to follow. But currently, they are using our project management capabilities. But as said, more detailed description of that case is in the making. And then Atte asking that do we still believe that over 40% EBITDA margin level target is achievable in the long run? And I do believe that. I believe that the investments that we have been making are completely investments that are in our own hands to decide upon and how to allocate those investments. And if we would have to make a very, let's say, streamlined operating model, we would be able to pivot our profitability levels as well, but we want to enable us to get to that high-growth momentum. And this is the reason why we want to make investments into our growth operations, into our product management and into our product development so that we're able to respond to the higher growth expectations. And also, our cost base is by far from being linear to our top line. So as we start to see the growth coming in from our growth operations and through the sales and customer acquisition, we do see that the growth leverage -- the profitability leverage is very positive through the growth. So we do believe that the margin levels are still achievable in the long run. And this is what we're also planning into our mid-range plans and how we're able to get the formula for enabling us to get to that target level. Satu, anything from you, you would like to add to that?

No, I think you pretty much covered it all. I'm also confident that we can -- we will be able to reach that in the long run.

And Emil is asking about our, let's say, customer segmentation and are we expecting to expand across the Nordics with large customers such as JM, NRC Group and are they the only customers in Finland? No, they are also customers across their countries where they operate. And yes, our plan is to expand internationally also with the help of our customers, international operations. And also as part of the internationalization planning, we're also looking into our market entry strategies in terms of organic growth, in terms of looking into inorganic opportunities, but also in looking into different kinds of partnerships that we can use for accelerating our customer access and our brand recognition as well. So more information about the internationalization strategies in our upcoming earnings calls. And like I mentioned -- let's see what we have here. So, [ Richard ]. I have a question regarding the up-sell new sale. On an annual basis, there is a great step up from '24. Any color here in terms of traction in the market and what is driving this? And also a comment, but there is also a step-up on churn down-sell on an annual basis. Is there a Q1 effect here? Or how will this develop from here, that will be key here on total level in terms of the growth ambition? Yes. So we definitely see that there is a positive traction in our up-sell and cross-sell opportunities. We have been mentioning about our strategic aim of increasing our product penetration in our existing customers, and this is one part of the growth strategy that we are now implementing. So we will have more people responsible for cross-sell with the existing customer base. So definitely, we will expect to see more momentum in that one. But also we will have more people who are focused in driving new customer acquisition and new sales. So we will have more balanced approach in driving both momentums. And this is one of the main reasons for us to put more resource allocation into our growth operations so that we have more people who are doing the so-called account management work of the existing customers, making sure that they are satisfied and they are growing the use of our products across the platform. And then we will also have more people responsible for new sales and driving in positive growth from that as well. So yes, we are expecting to see higher growth rates in terms of our upsell and cross-sell, but it will not happen by the cost of somehow lowering the focus in the new sales. So we are driving both of these as a momentum moving forward. And of course, churn and down-sell is a lot driven by insolvencies and the trend for our, let's say, the monitoring of the voluntary churn is very, very, I would say, critical point for our success, and we are driving this also forward by having more people allocated to customer experience, where the main target for them is to mitigate churn and to drive positive NRR across our portfolio.

Yes. And maybe to add a little bit on your question about the Q1 effect. So for example, or especially with the ERP solution, it is quite difficult to take a new ERP solution into use in January. And that also means that those customers who have, for some reason, decided to leave us, they are invoicing ends in January, and that also impacts the churn rate. So there is a Q1 effect also in the numbers.

Yes. And then let's take a final question here. We're starting to be at the top of the hour and great to see many questions coming in. What is our confidence that the market will recover towards the end of the year? I would say so that we do have the statistics and the trend that is supporting this to happen like Satu showed. But I have now met with tens of customers across Finland. And all of the customers are kind of like carefully being positive about the trend starting to be visible. So the number of tenders coming in, number of projects that they are estimating at the moment, number of projects that have been postponed or delayed are starting to get active again. So there are a number of indicators that are showing that the recovery is starting to happen, but we do repeat still the same message as we have been repeating before that what will be the pace of change in the volumes and the pace of change in, for example, demand in the residential buildings and apartments, is still yet to be validated and seen how quickly this will start to recover, but the confidence level is coming through the customer comments and through the trend that we're seeing in the volumes. Great. Thank you very much for participating. I hope this was a very, let's say, open and transparent view of our performance after Q1. Like I have said before, joining the Admicom team, let's say, spending more time together with the team and the customers is still giving me a fairly good feeling of optimism. There is still a lot that we need to see from a market recovery perspective, to see the growth starting to really materialize for our customers. And through that, we see that there's a positive opportunity for us as well. But mostly, we're now focusing on the things where we can make a difference, and this is where we can look into our effective resource allocation, making sure that our platform is meeting the customers' expectations and having a great user experience and how we can help our customers to build better to drive the higher productivity is where we see that the long-term success of Admicom will come. But thank you for this, and I'll see you then latest in the Q2 info. But from my and Satu's behalf, thanks for joining in and listening to the webcast. Thank you.