Arribatec Group ASA (ARR) Earnings Call Transcript & Summary

Hi, and welcome to the Q1 2025 investor presentation. My name is Ole Kjolvik, and I'm the Interim CEO of Arribatec. I will walk you through our financial performance for the first quarter and also share some of the key highlights from that period. The first quarter marks a significant moment in our turnaround journey. While we have faced financial challenges in recent periods, the actions we have taken are now translating into tangible improvements. The Q1 2025 has been our strongest quarter ever with strong growth and positive margins. We have delivered on our strategic realignment and cost efficiency initiatives. Revenue reached NOK 146 million, a 15% increase compared to Q1 last year, excluding discontinued operations. So just to be clear, the numbers were being presented in this Q1 report are from continuing operations. EBITDA landed at NOK 11.9 million, an improvement from Q1 last year of NOK 15 million. EBITDA margin for the group was 8% versus negative 2.5% compared to the last year. Our cash position has strengthened to NOK 65 million, up from NOK 23 million at year-end 2024. We have completed the divestment of Marine and Hospitality with a combined equity valuation of NOK 37.5 million and are now a leaner and more focused organization of around 250 employees in our three remaining core business areas. We concluded 474 new contracts in the quarter with a total contract value of NOK 130 million. The total revenue for the quarter was NOK 146 million, with recurring revenue reaching NOK 66 million, now accounting for 45% of the total. EBITDA is positive at NOK 11.9 million, up from negative NOK 3.1 million in the same quarter last year, with an EBITDA margin of 8%. In Q1, we incurred some severance costs related to our ongoing turnaround activities. And it's also worth noting that in Q1 2024, that had two additional Easter holidays compared to Q1 2025, along with the corresponding days of that typically come with Easter period. This should be kept in mind when comparing year-on-year performance. Regionally, Norway remains our largest market, contributing NOK 105 million in revenue, an increase of 12% year-over-year. Outside of Norway, which is mainly Sweden, U.K. and Continental Europe, they delivered a revenue of NOK 41 million, a 25% increase year-over-year. This regional performance underscores our strategic focus on high-performing markets in Norway and in Europe as a whole. The turnaround strategy we have initiated last year is now delivering results. We have rightsized the organization, reduced corporate overhead and optimize our operations. The new management team has been refreshed with representations from each business area, and we have successfully divested Marine and Hospitality. In addition, we have relocated to a cheaper head office effective from May. Combined, these actions have strengthened the group, leaving it with a strong net cash position and profitable operations. The three remaining core business areas all delivered growth and positive margins. Business Services delivered NOK 83 million in revenue with an EBITDA margin of 13%. EA&BPM generated NOK 28.9 million with a 12.5% margin. And Cloud contributed with NOK 39 million with a 6% margin. These results reflect disciplined execution and improved operational efficiency across the group. We have seen consistent revenue growth across quarters with recurring revenue representing 45% of the total. Compared to the first quarter last year, recurring revenue has grown 20%. The sales momentum remains strong. In Q1, we signed 474 new contracts and scope extensions totaling NOK 130 million, up from NOK 107 million in Q1 last year. As visible from the chart, the first quarter is typically relatively slow, but this year's 21% increase in sales compared to Q1 last year marked a solid improvement relative to previous first quarters. Some of the new logos and key contract extensions in Q1 are the European External Action Services, EEAS or EU Agency in simple terms, Alfen Group in France, IVL, the Swedish Environmental Institute, Hogga Kraft in Norway. And then we have a contract with a Norwegian defense company and then with a new contract with Green Mountain, Gassco, Equinor, Lea Bank, Vo Energy, the British Red Cross to mention a few of the new logos and extensions in Q1. The net cash flow from operations was NOK 11 million. The seasonality in our business includes quite high annual prepayments from our customers, but also to our suppliers. This reduces our combined net receivables and payables, but is net positive for our cash position and contract assets. The key drivers behind our cash flow in Q1 were as follows: we started the year with NOK 23 million in cash. During the quarter, operations added another NOK 11 million. The divestment of Hospitality and Marine brought in NOK 31 million. At the same time, we fully repaid all interest-bearing debt totaling NOK 32 million. The share issue contributed with NOK 39 million, allowing us to strengthen our financial position. All-in-all, this left us with NOK 65 million in cash at the end of Q1. So in summary, 2025 marks a successful execution of our turnaround strategy. We are now operating much more lean with stronger financials and a clear strategic direction. We'll retain the focus on profitable growth and value creation. That was it for now. But we'll wait a few minutes if you have any questions, you can use the deck form, and we'll give you a couple of minutes. Thank you.

Hi, and welcome back. We have received one question that I would like to answer, and that is about the outlook. We have left out the outlook section from this quarter report. And just to state that our primary focus in this quarter has been to ensure that we have profitable operations that we have a positive cash flow and that we also have a strong foundation to build the company on. We have, of course, discussed the outlook with the Board and the management team and internally. And at some point, we will share this also with the market. But then again, our focus now has been on profitability, and it will continue being that in addition to value creation. And at some point, we'll share more on the outlook. And also in the risk of guiding the market, I don't want to say too much now on this. But what I can say is that the Board and the management team is happy with the result in Q1 with the positive development and also with the overall performance in Q1. Another thing I would like to mention is that, I mentioned this briefly also in the presentation is that the Easter holiday came all in Q1 last year, and now this is set for Q2 this year. This is not unique to us, but it's just worth mentioning when you compare this quarter to the next one we will present later this year. There has been some onetime effects also in Q1 that actually will make the Easter effect a bit smaller in the second quarter. Other than that, I -- yes, I don't want to go too much into detail on the outlook, but come back to that at a later stage. Let me just see if there's any other questions. No, that was it. Thank you again for your attention, and we look forward to seeing you next time. Bye-bye.