Arribatec Group ASA ($ARR)

Good morning, and welcome to the First Quarter presentation for 2026. My name is Ole Jakob Kjolvik, and I'm the CEO of Arribatec. I will take you through the business highlights from the first quarter and also the financial review. If you have any questions along the way, you can submit them using the web form, and I will try to answer them at the end of this session. Also, if you need a more in-depth discussion meeting, you can also use the same web form to request our investor meeting. I will start with a quick overview of Arribatec before we dive into more details. We are a global team of about 300 dedicated people serving around 1,700 clients across all industries. Arribatec is built around 3 business areas: Business Services, Cloud and EA-BPM. Business Services, which is our largest business area, deliver product and services around ERP, financial planning, analysis, analytics, and own IP solutions for research institutes and apprentices. The team runs transformation projects. They do everything from defining the specific client and solution requirements to the implementation and ongoing support. Recurring revenue accounts for about 34% of the total revenue in Business Services. Cloud delivers flexible, secure cloud services for both private and public sectors. They offer hosting across hybrid environments, including sovereign cloud, plus consulting, outsourcing and end-to-end cloud solutions. Recurring revenue accounts for over 80% of the total revenue in cloud. EA-BPM delivers transformation and AI enablers such as enterprise architecture and business process management solutions and services. They are helping organizations work smarter, better and faster in accordance with internal and external laws and regulations. Their recurring revenue accounts for over 35% of the total revenue in EA-BPM. Together, these business areas deliver mission-critical systems and services across industries. Our people bring deep expertise, not just in technology around our software, but also in the industries where we serve. This combination is increasingly what the market is asking for. Generative AI is no longer just a productivity tool. It's becoming a fundamental driver of business transformation and getting the most out of it requires exactly that deep industry and contract-specific competence. I will now give you some highlights from the first quarter and then go over to the financial review afterwards. There are 4 things I would like to highlight from the first quarter. First, we continue to grow year-on-year even on back of a very strong growth in 2025. Second, looking across the 3 business areas, Business Services continued to deliver improved margins and strong growth compared to last year. The business is scaling. EA-BPM has significantly strengthened its margins and is set for growth, while cloud's profitability is unsatisfactory and is undergoing a transformation in order to reach a satisfactory, profitable level, which leads me to the third highlight, where I will spend more time on the cloud restructuring and where we stand today and the way forward. Fourth and finally, I will share an update on our new AI-powered delivery platform. Let's begin with the financial highlights. We continue to see overall growth across all key metrics, revenue, recurring and EBITDA compared to Q1 last year. This marks our sixth consecutive quarter of year-over-year revenue growth. And worth noting the comparison is getting harder. 2025 was a significantly stronger year than we -- than what came before it. So growing on top of that is naturally a better achievement. Revenue came in at NOK 152.4 million, up 4.1% year-over-year. And if we account for the current -- currency effect, the increase is 5.1%. Recurring revenue reached NOK 69 million, up NOK 3 million, which equals 4.1%. Recurring revenue now accounts for 45% of total revenue. All 3 business areas contribute to the recurring revenue, as mentioned. On profitability, the EBITDA results include noncash charges and nonrecurring items of NOK 3.4 million. Adjusted for these items, the EBITDA reached NOK 13.5 million, up from NOK 7.3 million in the same quarter last year. That's an 85% improvement year-over-year. This improvement describes well our focus, which has been on profitable growth, and it shows we are moving in the right direction. At the same time, we see a clear room to improve our margins in the cloud operations and thus, our EBITDA margins ambitions as group is clearly higher than 8.9%. Now look at how each business area delivered. Business Services continues its positive development, 9% revenue growth, NOK 90 million in total revenue and an EBITDA margin of nearly 12%. The Unit4 practice maintained solid operational momentum across regions. Several major projects secured earlier are now entering delivery, which supports activity levels going forward. We are also seeing growing revenue contribution from our own IP, which is strategically important for our long-term margin profile. And AI has become what we deliver and what we offer to our clients. EA-BPM is completing the restructuring where the focus has been on achieving solid profitability. The work has given the intended results, supported by the EBITDA margin at 12.4%, up from 8.7% in the same period last year. That came from a tighter delivery, better use of internal resources and a stronger commercial leadership setup. The team has also extended the QualiWare partnership on improved commercial terms. EA-BPM has strengthened its performance and is ready to scale. Cloud is in the middle of the transformation phase. The revenue declined 3.6% year-on-year, but adjusted for the change in intercompany revenue recognition implemented in late '25, where NOK 1.3 million is now presented as a reduction in COGS rather than revenue. The revenue development in cloud was broadly flat. The reorganization in cloud has consolidated the business around 3 core pillars in which we see the biggest growth potential. We took NOK 2.3 million of onetime restructuring costs in Q1, which puts the reported EBITDA margin at negative 8.4% or negative 2.4% adjusted for that cost. We're not done with the transformation, getting cloud back to a profitable run rate is the priority, and I will share more on that in our next slide. We have reorganized cloud around 3 pillars: Managed Services, Modern Workplace and Cloud Infrastructure. This was a deliberate restructuring to sharpen our focus on the core and the areas where we see the biggest growth potential and also to operate more effectively. Alongside that, we are in the final stage of automating our core service delivery in something we call ANSA 360. This is a new and better way of delivering our services that support scaling while also improving the experience for the clients. We are also continuing to invest where we see the strongest pull, sovereign cloud, security and AI. On the financials, as mentioned, the revenue was broadly flat year-on-year and with around 80% in recurring revenue. Margin, however, came down. The underlying EBITDA, also, as mentioned, was negative 2.4% in Q1. But turning cloud profitable is our priority with the actions already taken and the new structure in place, we expect financial performance to improve. The pipeline is solid, and we're also seeing a tailwind from sovereign cloud offering with strong interest across both public and private sectors and the first clients already onboarded. The rollout of EU AI Act is expected to accelerate demand for sovereign cloud, security and AI-enabled infrastructure, which is precisely where we have positioned this business. Now let me tell you about Nexus. This is something we have built internally that I think is a real competitive advantage to us. The challenge many companies face is that AI makes it easy to build something fast or prototype, a proof of concept, an app that works in a demo, but getting that from a demo to a production in a secure, consistent manner at scale is where most companies struggle. With that shared platform, you end up with every team doing things their own way, inconsistency around security, no shared tooling, no reuse and every deployment feels like a risk. That slows you down and kills the value you are trying to create in the first place. Nexus solves that. It's a standard way of developing and deploying applications, with security, deployment, pipelines and operations built in from day 1, not added later, not bolted on, built in. And everything is portable and sovereign-cloud ready, which matters more and more to our clients. On the control side, and this is something our clients care deeply about now more than ever, Nexus gives us safe security defaults, proper access control and monitoring that surfaces issues before the clients ever notice them. Deployment becomes a routine step, not a risky event. And on the speed side, we have a proven integration patterns and reusable building blocks that let us turn a prototype into a production-ready product significantly faster than starting from scratch each time. We call this the golden path, a set of guardrails and tools that means a new developer joining a project is productive from day 1. And AI tooling is embedded throughout, not something we layer on top. So when I say Nexus is a competitive advantage, what I mean is this -- it lets us deliver faster with fewer errors, better security and more reuse across teams. That translates into better outcomes for the clients, more leverage in how we deliver and a more scalable business. It's not just a technology platform. It's an operating model that turns any application ID into something we can actually deliver at scale. That was what I wanted to share on the business highlights. Our new CFO, Bent Hammer, will not start until 1st of July. So I will also take you through the financial review. Revenue came in at NOK 152 million in Q1, up 4.1% year-on-year. Last 12 months, NOK 584.8 million, a growth of 12.5%. Growth was primarily driven by Business Services, which grew 9%, while Cloud and EA-BPM saw a revenue decline. Recurring revenue grew to NOK 68.6 million in the quarter, up 4.1% year-on-year and now represent 45% of the total revenue. This is an important indicator of the stability and predictability of our revenue base. On profitability, the EBITDA 8.9%, result include noncash charges and nonrecurring items of NOK 3.4 million. Adjusted for these items, the EBITDA reached NOK 13.5 million, up from NOK 7.3 million in the same quarter last year. That's an 85% improvement year-over-year. This confirms that the operational improvements we have implemented are structural and not seasonal. Let me take you through the cash flow for the quarter. This slide tells a really positive story. Operating cash flow came in at NOK 35.9 million. And to put that in context, a year ago in Q1 2025, we generated NOK 10.7 million. That is more than 3x the cash generation from the same quarter last year, and it reflects a fundamentally stronger and healthier business. Let me break down where that cash came from. The underlying profit engine, profit before tax, excluding depreciation and amortization, generated NOK 13.3 million. That is the core of the business working as it should. On top of that, contract working capital was seasonally strong in Q1. This is normal for us. Annual client invoicing happens early in the year, which creates a positive cash effect in Q1 that gradually normalizes through the rest of the year, meaning the same pattern can be expected to repeat itself next year. On the net working capital, receivables increased, which reflects higher business volumes and payables came down through normal timing, nothing structural here. During the quarter, we also performed a share buyback of 2 million shares as announced on March 13. This represented an outflow of NOK 13.1 million, a deliberate capital allocation decision that reflects our confidence in the business. The net result is a cash position of NOK 91.4 million at the end of the quarter, up NOK 17.6 million from where we started. The headline here is simple. The business is generating significantly more cash than it was a year ago, and we are deploying that cash with discipline. I will now give you a couple of minutes to submit your questions, and will come back to answer them shortly.

Hi, and welcome back. I can see we have received a couple of questions. I will now go through them one by one. Starting with the first one. "Can you comment on your Unit4 cloud migration pipeline for 2026 and expectations for growth in Business Services over the coming quarters"? I've mentioned a couple of times that we have a lot of the cloud migration projects and many of these were done and completed 2025. But what we have seen is that those migration projects has led to other type of projects. So we have continued to deliver services and support to the ones we have supported in the cloud migrations. We still have cloud migration projects in pipeline that we have planned for, not only in pipeline, but that what we plan for performing over the next quarters. So we still expect growth as a result of the cloud migration projects. But in general, the growth comes from migration projects leading to other projects. When it comes to growth in Business Services going forward, as mentioned during the presentation, we now expect them to scale. They have scaled in the last quarters, and they also have a decent EBITDA margin, but we also see that the potential for scaling is good going forward with, yes, a lot of the utilization already in place for 2026. "Does EA-BPM gross margin improvement year-over-year reflect the new commercial terms for QualiWare"? We are using the new margin as part of the budget and what we work for. But I would ask -- or I would answer no to this one. We will not see the -- we have not seen or what we have presented now doesn't include the upside from the commercial terms. "Can you give an update on the FTE situation in EA-BPM and when you expect employees to return? Also, how does your pipeline for the segment look? And do you expect employees returning and going straight to customer delivery? " Starting with the last one. We have a really good track record of bringing people back from paternity leave and other things and have them relatively fast going out to billable assignments. So normally, it's just a couple of weeks, have them a soft onboarding and then back on billable work. So that shouldn't take much -- yes, that normally doesn't take too much time. And when we expect to have all the FTEs back, there is still some in maternity, but our focus hasn't been on growth in terms of numbers of people. Our focus has been on getting EA-BPM on profitable numbers, and we have succeeded with that. So now that we have, kind of, the solid profitable foundation in place, then we can rather look at how to grow and number of FTEs is, of course, one way of growing. And we also see that they have a strong pipeline. May has been -- yes, or the first quarter has been filled with many tenders, and we expect that this will lead to projects going forward. And we also have many of our employees fully booked for the remainder of 2026. So we expect them to also see positive numbers going forward and positive growth. Let me look at another question. "Cloud has lower margins than the rest of the segments. Given current revenue base, what is the potential margins within this segment? Could cloud reach the same margins as the rest of the segments on the current revenue base? Or does it require growth to reach the same margin levels"? We are, of course, not happy with the current margins in cloud. They are in the middle of our restructuring phase or not in the middle, we are kind of coming closer to the end of that restructuring. And the actions that has already taken place, we know that, that will give a positive effect. So I think there's a lot of improvement possible within the current base. But still, I think to come at the same level as the others, of course, we need also to have growth on the top level as well. But good questions. But yes, so we expect to see results going forward from what we have done, and we will continue to finalize the restructuring. And in parallel, of course, we work with a strong pipeline that also cloud has that will generate more revenue and improve the numbers. I think we have several more. Let me have a look. Yes "Business Services grew 10%, but margins declined slightly. Could you explain in more detail why and how investors should think about scalability within this segment"? Yes, briefly mentioned that in the first question, we think scalability is still possible or it's not just possible, but that's what we plan for in Business Services. There could be some seasonal effects with the slightly decline in margins. We know that Easter played a role in Norway, in particular, where we have 2 days that was taken in Q1 that compared to last year was taken in Q2. So that has an effect. And we also have some other cost effects in Q1 that also plays in. So I think scalability is what we plan for going forward, and we have a good pipeline in Business Services and also a lot of projects for 2026 that is already secured. Another question. I think -- let me just refresh and see if there's any other questions coming in. Yes. A couple of more. "You said that you have started several projects from your backlog now. Is now, meaning during Q1 or now as today in May"? Yes, good question. It's -- they started -- many of the projects has been booked in April, and you will see the result of those booking from Q2 onwards. So now as in Q2 based on the booking that we made in Q1. "What type of new hires are expected in 2026 to support growth"? Good question as well. We -- yes, we have -- in late 2025, we strengthened the commercial team in Arribatec. So we hired more sales resources. What we have hired lately is more on the technical side and also within those areas where we believe the growth is highest. So in cloud, for instance, that would be in security, AI, sovereign cloud. But in Business Services, we we need the technical resources to work with AI, as I explained, with the Nexus, we see a good growth potential there. And in EA-BPM, it's around skills around enterprise architecture. So that's kind of the type of resources we are looking for. But our focus is on profitable growth. So unless we see a project that will need that competence, we won't hire. So we do it kind of step by step. But we see based on the pipeline that we will need more people during 2026, but more on a modest level. Okay. Let me just refresh again. I think that was all the questions. Thank you so much for sending in questions, great questions. If you need or want more information on the questions or other things, you can send questions to the e-mail [email protected]. You can also send it to me personally using the e-mail that I sent in the stock message this morning. So then I'll leave it at this. Have a great rest of the day. Bye-bye.