Lumi Education Group AS (LUMI) Earnings Call Transcript & Summary

Okay. So I think we are ready to start. So hi, everyone, and welcome to this presentation of the H1 report for Lumi Education Group. I'm Nina Vesterby, the CEO; and Martin Prytz, CFO, is joined with me on this presentation. So the agenda for today is a quick look at the highlights of the year, and then Martin will give you a financial update, and I will conclude with a commercial update in the end. So just a quick look at H1 in brief. We are very pleased with the results of the first half of 2026 and for the full school year '25-'26. All companies in Lumi Education Group have delivered uplifting results and growth on both revenue and margins. We have had a busy year with many efforts throughout the business, including acquiring Bjørknes and welcoming EnkelEksamen into our portfolio. So these are 2 very different businesses that will contribute to growth in different ways. EnkelEksamen, or Edrupt, is now included in our report, and Bjørknes will be included from H2. So like 3 previous periods, we are looking at the first half of '26 with all our strong performance and growth in all our businesses in revenue and margins. And in total, we delivered all-time high revenue. For school year '25-'26, we delivered 16% growth in revenue and 20% adjusted EBITDA margin. So both our biggest areas, ONH and Sonans has strengthened their margins with 6 percentage points from H1 '25 and ONH up to 26% and Sonans up to 18%. This has been done by cost discipline and revenue growth in both companies. So I will leave the financial details to Martin and come back with the commercial update later.

Thank you, Nina. Let me shortly take you through the financials for the first half of 2026. Group revenue came in at NOK 277 million, an all-time high for the first half. It's up 17% year-on-year and up 10%, excluding EnkelEksamen. And that concluded the '25-'26 academic year at NOK 550 million, up 16%. ONH grew 15% with strong momentum for the autumn intake continuing into the spring. As for the academic year as a whole, the growth came from online programs, both newly launched and established ones. Sonans grew 2%, down from 10% in the second half of '25 due to a softer spring intake. EnkelEksamen contributed NOK 19 million over the 5 months period since consolidation in February. Adjusted operating expenses, including D&A, were NOK 220 million, up 11%, but the comparable number is plus 4%, excluding EnkelEksamen against 10% comparable revenue growth. That gap is the operating leverage in this business. ONH costs grew 6% against 15% revenue growth with scale on the existing platform. Sonans cut its cost base by 6%, mainly driven by lower personnel and lease expenses following the restructuring. And I want to underline the Sonans number because it is the proof point that matters for the year ahead. This organization has demonstrated it can take cost out while protecting the business. That is the capability, the cost measures for '26-'27 rest. On the more details on the OpEx. Personnel remains the largest category, up 7%, excluding EnkelEksamen, driven mainly by ONH capacity and wage inflation. Other operating expenses were broadly stable. Credit loss expenses fell year-on-year, driven by the sale of the collection portfolios at the end of June, completed at better pricing than the loss rates in our ECL model alongside stable underlying payment behavior. I will come back to the cash effect of that sale in a moment. Nonrecurring expenses were NOK 6.6 million, mainly M&A costs, the ONH accreditation appeal and residual Sonans restructuring. When bringing revenue and cost together, adjusted EBITDA ended at NOK 56 million, up 54% or 42% when excluding EnkelEksamen, with the margin reaching 20% for the first half and also 20% for the full academic year as well. Both main segments delivered strongly, ONH at NOK 42 million, up 48%, with the margin expanding from 20% to 26%. That is volume growth converting to scale. Sonans at NOK 17 million, up 54%, margin from 12% to 18%, and that is predominantly the cost work since revenue grew only 2%. Free cash flow after leases was NOK 41 million, an improvement of NOK 47 million year-on-year. The prior period was minus NOK 6 million -- and the cash conversion in the period was around 80%. And note that the figure excludes EnkelEksamen for the 5 months consolidated, and it enters the measure from the second half this year. NOK 25 million of the cash came from the sale of the collection portfolio for Sonans and ONH in June, which also reduced the receivables by net NOK 14 million and improved net working capital to minus NOK 38 million. And as stated on previous presentation as well and in this, keep in mind that working capital will fluctuate between periods depending on the timing of the portfolio sales. On the balance sheet at last, the leverage ratio ended at 2.0, which is well below the 4.10 (sic) [ 4.0 ] covenant, and including EnkelEksamen's earnings for 12 months on a pro forma basis, the ratio was 1.6 and either way, it's a substantial headroom. We drew NOK 55 million on the CapEx facility to fund the upfront payment for EnkelEksamen. The earn-out shown at NOK 86 million is the maximum under the SPA and the recognized fair value is NOK 71.5 million. And the first installment for the first earn-out falls due in Q4. And also available funds of NOK 185 million will cover the earn-out, the business consideration and ordinary CapEx without any additional financing. And with this, that concludes the financials in this presentation. I hand it over to you again, Nina.

Okay. So let's do a quick commercial update. So with high growth previous school year and positive macro trends, we did expect continued high growth in '26-'27. And while the intake is not complete for a few more weeks, our current indications point to broadly flat intake for ONH, which is somewhat offset by growth in recurring revenues from previous intake. We also see a decline in Sonans looking at somewhere around 10% to 15% at this point. When we have completed the intake, we will follow up with a trading update with our assessment of the drivers of the intake and the implications for future growth. We expect the timing to be end of October. In the meantime, we do continue our growth initiatives and develop our portfolio towards the demand in the market. We do pursue institutional accreditation and accelerate growth and consolidation projects in Sonans. And then EnkelEksamen is continuing on the growth trajectory from previous years. But to offset the impact on margins, we are also looking at a comprehensive set of measures on both revenue and costs that will mitigate the effect on profitability if we do have softer intake. So our strong management team continued to recalibrate scale and move forward in this market and to take all the opportunities that are possible. Just a few on NOKUT as well. I just wanted to give a few notes on NOKUT because -- well, we wanted to give a brief on the situation regarding the institutional accreditation. And to be accredited means that we can make faster changes to our programs and portfolio to make sure they serve the needs of a future labor market, which I believe now is sort of under construction with the rise of AI. So today, it can take between 2 and 3 years to have a new program accredited. And although we have a good pipeline of applications, we see the need to pivot when needed. As you might know, we were not granted accreditation before summer. We do not agree to NOKUT's decision and have appealed accordingly. So we will come back when we have more -- or when we have material information on this subject. So this concludes our H1 update. We look forward to coming back with a more comprehensive presentation on the complete intake later in this fall, where we will also prepare for a Q&A session. But if somebody would like to book a one-to-one, we are, of course, welcoming that and just contact Martin, and we will set it up as soon as we can. So thank you so much, and see you in October.

Thank you, everyone, for joining. Thank you.