Columbus A/S (COLUM) Earnings Call Transcript & Summary

Good afternoon, and welcome, everyone, to this webcast for the presentation of the Q2 2026 report from Columbus that was published this morning. [Operator Instructions] With that, I'll hand over to CEO, Soren Krogh Knudsen; and CFO, Brian Iversen from Columbus. Please go ahead.

Thank you very much, Rasmus, and good afternoon to everybody. Thank you for joining this webcast where Brian and I will be presenting our quarterly results for the second quarter of 2026. We will start -- I will start by going through a market and operational highlights section, and then Brian will dive into the financial reporting based on our business line and geography structure. Then Brian will also cover our outlook, and then we will take questions at the end. . So let's get started. I'll just give you 10 seconds to read through this disclaimer. All right. So revenue in Q2 increased by 2%. And as such, it marked a change following some quarters where we have had negative organic revenue growth. We achieved this despite still having some market conditions in Denmark and Sweden that are not that favorable. So we have yet to return to growth for those 2 geographic -- those 2 countries. So this growth was really driven by a very, very strong performance in Norway, but we've also seen a good performance from the U.S., and we've seen a good performance from the U.K. as well. Our EBITDA remained flat in Q2 2026 compared to same quarter last year, and we ended up at a 4% margin. This reflects, to some extent, still that we had a slower start to actually going back all the way to Q1, which we recovered partly in Q2, and we continue to gather velocity in our organization. But also, we -- I think it's fair to recognize that there are some other dynamics at play. So competition is pretty fierce. And the market is still, to some extent, hesitant, driven by various factors. I think we've already discussed previously some of the geopolitical turmoil, which has not really improved, but perhaps it's become more of a new normal for our customers, so we can work through that. But also all of the technology advances that we help deliver are affecting a change in investment strategy from our customers. So they need to come up with a new strategic mindset, and that is what we are now succeeding with, I would say, as we see the return to growth. In essence, some of the activities that we've been doing for years, the configuration, the setup work, the integration work, we are now delivering at a better pace, more efficiently. And that is then being offset by new services from our side, which is more advisory focused, which is much more related to taking out efficiency gains from the AI platforms that we're delivering. So there's a change in the service mix underneath, which we're currently undergoing. Another way of looking at the improved activity is, of course, our efficiency level, which is also known, I guess, in the industry as the billability, which increased to 65%. So a pretty good improvement compared to same quarter last year. And it is a development that we expect will continue as we go into Q3 and Q4. So as mentioned, it was especially Norway, and it was especially Dynamics Norway that experienced a strong growth of 52% in the quarter. So that was a very strong driver of the group's overall 2% growth. And it was driven by some of the major contract wins we've talked to you about in our previous quarterly sessions. Also on a more broad geographical basis, data and AI has contributed significantly to the growth, and that was basically more spread across several geographies, but primarily in Scandinavia is where we've seen the growth come from, Denmark, Sweden and Norway. So as we go through our outlook later on and talk about what we expect for the coming quarters, I will also say that the momentum we have in Norway, driven by some major contracts will -- we expect even further momentum gain in Norway. So where you may expect that we've now reached the full velocity, we're still expecting more to come. And likewise, we have improved our efficiency also for Dynamics in the U.K., but we're still expecting further velocity gain from those particular units. So I would like to just show the backwards-looking geographical revenue performance organically, where you will now see Q2, as we've just talked about, going back to 2%. So it does basically follow 5 quarters of the negative organic growth going back to Q1 of 2024. And obviously, we are very pleased with the return to growth, although 2% is obviously modest. But if you see the way we look at this trend line, we are -- our ambition and our planning is, of course, to go to a higher growth percentage in the coming quarters. So as we go through a change, as I was explaining before, in terms of services delivered and also our sort of commercial pipeline building, which we've talked about before, we remain very focused on our operational efficiency and cost discipline and something we want to improve further on in the coming quarters. We have seen improvements, obviously, as I said, reaching 65% in efficiency already, small reduction in full-time equivalents employed, but we will continue to stay in this mode, which consists both of being very cost conscious and even taking to some degree, smaller elements of cost out in order to reinvest that in the new service areas that we're growing, which you can also see in the data and AI growth number that we have shown. So we know we need to be very adaptive to build the organization for the future. We can clearly see the demand for delivering customer value, and it's a mirror that's helped from our customers to us on a daily basis. And as we increase our effectiveness, we know that this is working. So the patience from our large customers in terms of when they expect to see a return on investment is shortening, and we are managing to deliver against that, and it makes it very exciting, and it's primarily enabled by some of the technology advancements that find their way into our project delivery models. And we expect much more to come from that, although I will say it's already extremely significant how much some of the specific project delivery activities have been streamlined by technology. So it is something we review on a monthly, if not weekly basis, to embed that into our own delivery and it's also what ensures that we are -- that we stay relevant to our customers. From a customer perspective, the new areas of work are related to realizing real efficiency gains for our customers. We start often with an offset in the ERP platforms, which are the core systems of many of our customers. And we obviously know this domain area the best. But we can see that we are now expanding into multiple domain areas because the way we implement the AI technology doesn't really start with an ERP process or ERP domain offset. It always starts with a complete business process and the business processes tend to touch many different technology domains. So we're working very differently there, and we have also formed new partnerships to strengthen our own expertise within automation, some are specific to M3 and Infomind. So we continue to adapt the ways of working and carving out new service areas, which we find the most relevant for us and for our customers for the future. And I think with that, Brian, I'll hand over to you for financials first, and then we can take questions later on.

Yes. Thank you, Soren. So let me walk you through the 3 slides, revenue contribution margin and service revenue per country as usual. So let's start with the revenue for Q2, split into our 5 business lines. Firstly, Dynamics in line with the group is getting let's say, slowly back into growth, 1% plus for the quarter, as Soren already mentioned, primarily driven by Norway, but also U.S. is a strong contributor to this growth, whereas we still see some hesitance in Norway and Sweden.

Sweden and Denmark.

Yes, Sweden and Denmark, sorry, yes. Norway is in the past, but they are back in a heavy growth. M3, a slight decrease of 3% in the quarter. They simply had a slow quarter and a bit lower business activity in some of the smaller countries, I think Sweden is actually getting slowly back, but still roughly minus 3%. Digital Commerce continued to face some headwind. I think I have said that for quarters now. But after all, Sweden is actually getting slowly back into growth, which have been -- and which is the biggest country within this business line. Data and AI, Soren already mentioned, plus 40% goes without saying, it's a huge demand after some of -- a lot of new strong consultants we have hired in this business line. If we look at the contribution margin, Dynamics, which again is our biggest business line, plus 60% on top line, had a small decrease of 1 percentage point. And of course, that is hitting the full group as big as they are. Sweden -- sorry, M3, as mentioned, it had a very slow quarter, both on top, also on bottom line. They invested quite a lot in new sales there, but it is below expectation for such a big business line, and we do clearly expect some return to a fair level in the coming quarters. Digital commerce, which is, as you remember, still dropping a bit on the top line is starting to get a good grip on the bottom line, and they are increasing slightly with 2 percentage points, still below where they should be, but we do see a turn and a clearly improved control of the business and profitability within the business. And EIM, there is some seasonal fluctuations in that, but they're still running on a very healthy profitability level. Briefly on our market units, or countries, as Soren already mentioned, Sweden and Denmark is where we still see or face headwind. I think there is some light at the end of the tunnel, but there's still work to do, whereas U.K. is flat, but adjusted for currency impact. Over there, we actually, for the quarter, see a growth -- they are back in growth. First quarter, they were negative. And there we also expect them to continue that past the coming quarters. Norway, as already mentioned, 52%. That is really strong, and it's great to see that we have -- we're getting a really strong foothold in that country. And U.S. is also growing, have been for many quarters, still relatively small. So one big project that is turning or whatever can impact that slightly, but a good part. Now we turn to H1, slightly the same story, but I have 3 slides here. Dynamics for the first half year of 2026, below 3%. But as you could see from the quarter, the turning point is expecting to be here in Q2 to a positive growth. M3 also roughly flat. They have had some major strong wins, where there have been a slight postponement in project and that do affect them. They have a lot of quite big projects, especially in Sweden going on. Digital commerce, yes, I think also down for the first half like Q2. But more importantly, with my hat on, they are getting a really good grip on the bottom line, and that is a strong priority. But we also expect to see growth coming in the next few quarters. Data and AI, 31% and do continue the growth in the coming quarter as well. Of course, with that speed, 50% might not be the standard for the coming 4 quarters would be nice, but let's see. But definitely growth -- double-digit growth is expected. And contribution margin for H1, again, here, Dynamics is down with 4 percentage points. And that is -- a big chunk of that is linked to a weak start for the year Q1, as you might also remember, and some new big wins where we just need to get in the office with the customer, get ourselves, get the right team on and slowly working our way back into a fine profit, which will also help the total Dynamics and the total group on the bottom line in the coming quarters. M3 is mainly linked to a quite weak Q2, as you just saw, but we expect them to improve back again in the coming quarters. Digital Commerce, slightly up 1 percentage point, a bit more in Q2. That had been hard work because it is hard to turn the bottom line when you have a decreasing top line, but they succeeded and we start to regain momentum there. And Data and AI, we have done some heavy investments in new very strong consultants in Denmark and Sweden, recently U.K., I saw new good guy there. And it does take a few months before they really are fully out running. But -- so we still continue to invest in that and that is seen from the top line as well. Market unit, my last slide for the first half, same story, Denmark and Norway or Sweden and -- Sweden and Denmark, sorry, is looking into decreases, whereas Norway and also U.K. adjusted for currency is a growth or slightly growth scenario. But we do expect us to get at least an improved revenue in both Denmark and Sweden in the second half. There's really a strong pipeline out there, but I still need to get into the books and in here before we see the real numbers, but we do expect positive growth at least for the group, as you know, for the second half, yes. Okay. Then I only have the outlook left. And as -- no, I don't think you mentioned it, Soren, but we maintain our outlook for the year, 0% to 5% organic growth and 8% to 10% EBITDA margin and that we maintain as the situation are right now. Good. That brings us to the questions. So I will hand over to you, Rasmus, for commencing that.

[Operator Instructions] The first question here comes from Wei Zhou from SEB.

It's Wei from SEB. And a couple of questions from my side. I'll do one at a time. Firstly, Brian, you just mentioned you see a strong pipeline here in Sweden and Denmark, and you are confident to return to growth in the regions in the second half. I mean, could you elaborate a bit here the pipeline. Is it something you have won a contract you have signed? Or is it still sort of an early stage?

Okay. I think I'll cover that one, Brian. Thank you, Wei. I think Brian was -- when he talked about the pipeline, it was meant slightly different. So let me just go into detail with that. Obviously, second quarter, you saw strong growth from Norway. We talked about the U.K. also being in growth with the -- in local currency. We do expect, obviously, the growth rate to increase in the third and the fourth quarter. But what I think we misunderstood is that I expect now -- we have even more momentum in Norway as I was saying. So even though it's a very high growth percentage that we are presenting there, we expect continued very strong growth from Norway. And then we expect a strong growth also to return to the U.K. . And especially for the U.K. part, it's a very healthy, I would say, mix of projects that have already been landed, but where we are mobilizing and so we're getting up to full efficiency, but essentially where the sales process is over and an interesting pipeline. In Norway, to get further growth, we are bidding for some major contracts, which would add even further to our momentum even if only -- I'm almost going to say one of them or a few of them would come through. So back to focus on Denmark and Sweden. We have stabilized on the level where we are now. I think as we get into Q3 and Q4, we get more favorable quarters to compare ourselves against last year. So that's one thing. But obviously, we would much rather like to see a true uptick in performance. And we've been heavily focused in Denmark, particularly in Dynamics Denmark on building a strong pipeline with bigger representation of the very big customers, which is sort of the element missing compared to our other geographies. We have a very strong medium sized, medium to large, but we're missing some of the biggest engagements still in -- particularly in Denmark, which we're focused on building. Whether that hits us in Q3 and Q4 remains to be seen. Second question, Wei?

Very clear. Second question is on margin. You mentioned the price pressure, fierce competition. I was wondering, is it broad-based across your markets? Or is it in selected markets. And on top of that, is it possible to indicate that to what extent you have to cut or lower the price in order to win larger contracts. And if you could maybe also talk about what are your initiatives to mitigate the pricing pressure?

Yes. You want to start on that?

Yes. The first one, I think Wei, it's there different in our geographies on the pricing. I mean what we can see is that we are running at a very healthy margin in our U.K., U.S. markets that we know. And the Scandinavian market is a bit more, call it, under pressure. And that is something that we are working on. So that's the split. Germany is also a healthy market. So we have quite a mix here. I don't know if you want to add to that. That's probably roughly how it is on the bigger scale, then you can always dig into each business line in each market and so on. And the second question was, what was that? That was...

To what extent do you have to lower your price in order to win large contracts.

Yes. Okay. I can cover that one. So we're not lowering our prices. So that's the easiest way to answer it. So we have a slight increase in our hourly rates. But of course, we also have the -- as you would expect with inflation, a slight increase in costs. So it's more of a flat development on that. As Brian was saying, I would say that we are very -- we've had real strong focus for the last 5 years on improving our project margins or our direct gross margin, if you will, from each of the projects, which has been very healthy and remains very healthy. At the moment, where we are sometimes considering entering engagements on slightly lower rates or -- is always associated with very large engagements. So typically something that spans 2 or 3 years and where we see big potential for a permanent strategic relationship with the customer. And as we win those contracts, we -- as you would also expect in our industry, we typically see the first 3 to 6 months, the margin does not reach its full potential. We travel a lot in the beginning to introduce everybody. We invest always to get a strong start on the project, and then we typically see our project margins improve as the whole engagement stabilizes over time. And as a final one way on your interest in hourly rates and its impact on our profitability level, I would also say that we are expecting in the coming years that a proportion of our time and material revenue will be transferred, and we are in the process for some of that to a more fixed pricing akin setup. Some of them are fairly advanced outcome-based prices. Some of them are more traditional fixed price for functionality. And I think it's definitely in our interest to do so as we gain implementation efficiency, but it's also in our customers' interest to do so. So that's another change that we're expecting, and I think that will also affect our margin positively.

Yes. Can I just follow up on this discussion. I recall that we had the same dialogue, same discussion late last year. And at the time, you were still very firm on keeping the time and material contracts as your business? And what has changed your mind here, it's only half year has passed?

I don't think we've changed our mind, and we still have, of course, the vast majority of our business on time and material. But the fundamental change that is hitting is that is when does time cease to be a meaningful indicator of value delivered. And with all the investments we are currently making in platforms that support the individual consultants' efforts, you could compare that consultant 1 or 1.5 years ago, how much can they get done in 1 hour and how much can they get done now? And there's just a huge difference. You can -- it varies, but it can often be 10x more productive the way they're working. And with that, time is no longer an effective way of talking value delivered when you talk to a customer. And that is really what's driving our understanding that we need to move towards this platform. Fixed price is not -- it's not a perfect vehicle, of course, it has its own set of implications, which we have built systems that can manage and which we're comfortable managing. But -- so it's not like we suddenly just like fixed price. But -- so when you ask what's driving the change, it's the technology. And it's a technology enablement of a skilled consultant, which makes that consultant so much more efficient with the tool set than without the tool set. And that's what drives it. Thank you, Wei.

And next question here comes from Michael Friis at HC Andersen Capital.

Yes. I also have 2 calls. Can you talk a little bit about the move the bridge from 5.1% in margins to 8.10% in your guidance. Is it volume? Is it that you now get deeper into contracts and get more margin out of that, like you mentioned in the firm. And is there -- we heard from some other competitors in your business that this -- that you have a token cost, you have a price to train AI, but you don't have the real contracts to move that. So going to the fixed price. Is that also a part of the solution. So a little bit about the moving blocks that will move you from the 5.1% to the 8.10% guidance.

Let me start with the moving blocks, Michael. And it's not one big bang coming down from heaven. But it's a bit what you said. Growth is, of course, a much easier environment to be in when you look at bottom line in the consultancy business than a decline. So that is one of them. The second is, as we have been talking about here, margins and margins and margins, especially on new contracts, bigger contracts is something that Soren and I is also heavily invested in and probably also going a bit deeper than we normally would do to make sure we get the right focus on that. And then the third one is efficiency. You have seen it improve. As Soren mentioned, it's not like we are satisfied with 65%. So it's something that we continue to push on and believe there is more in. So I would say that is the 3 big pillars. And then you, of course, can see what is in general cost level, back office cost, enabling cost, as we call them. That is something that we constantly look at. And of course, we evaluate is it the right level, right percentage of revenue compared to the business environment we are in. So that's the 3 to 4 pillars that we are working on. I would say it's not like they are new, but we sort of play different with them depending on the situation. And then maybe you take the...

I'll take token cost. Great. Okay. So let's just elaborate a little bit on your question, Michael. So I think you meant to what extent is token costs now a considerable cost factor for us when we deliver projects, very valid question. I think the easy way to answer it's not yet a significant factor going into our projects, but it's certainly something that we are seeing more and more of. And as it will become a substantial cost -- input cost factor into any team delivery in Columbus and anywhere else. . And with fixed price, of course, we can contain some presumptions that we have, and we can keep that in the project and not having to keep track completely on variable token consumption. But that's not the interesting thing for me about tokens and basically the variable pricing that we are seeing being introduced globally right now. The interesting thing is that all the hyperscalers of the world's CapEx investments have yet by far superseded, I would say, in simple terms, the revenue that they're generating, and that has to -- those ends have to meet and that -- and introducing variable credit pricing or token pricing, whatever you call it, is the start of that, and it will increase, and it has only just begun. For Columbus, this mainly represents a huge opportunity, which has already started. Most of our customers, as we work on implementing technology for them are very concerned about both the cost picture they're looking into long term as they commit to this technology, the contractual obligations they have with their vendors and how locked in they are, all the governance, the security aspects of it. So that could both be intellectual property and who retains title to everything. And for us, this is part of the growth that we're seeing in data and AI. So yes, we have increasing token costs for sure, and this will continue. But for us, it's mainly a business opportunity because it basically means that the domains that Columbus is an expert at will be much more costly for our customers because they deliver more value to the customers, but it also has to be managed very carefully, and it is a very complex thing to do. So many customers opt to have somebody like us assist them in that process.

You almost jumped my second question because that was -- there's also a bit of discussion, frontier models, high token costs versus customized models, which I guess must be where consultants come in, their knowledge, you don't need a Ferrari to pick up posts and such stuff. And the in for a day, I'm not sure I mentioned it correctly, you had there. I can see your AI is starting to really pick up there, but are you seeing real momentum here, people afraid of token costs, not needing frontier model, needing customized models and you can make that cheaper because you know how to best utilize AI. So you don't run up the token cost. Are you really starting to see that? And is that what we can see in AI? And will that accelerate into the second half and into '27?

So to the last part of question, Michael, I'm just going to be very short and say, definitely, yes. On the first part of your question, can we see that the customers really are occupied with this? Absolutely. But that being said, I still think it's very embryonic. Like for all of us, we have to recognize we are at the very early stage. You're absolutely right in that we are shooting sparrows with cannons or whatever we say in Danish or a truck to deliver a small parcel instead of -- so this has yet to fully mature. The reason I'm just not saying fully yes to what -- to the way you're expressing is that I still think the customers are more important with saying how much efficiency gains can I actually drive out of this. And then you look at the cost side of that and saying, okay, let me realize those benefits and then let me marry up the extra cost with the benefits actually. And I know we say everything is happening in months now, but this is not happening in months. This is for the next year. This is a completely new world that we need to realize. There's also a technology aspect about -- so we could perhaps cover that in the technology part of it, which is -- you're talking about the LLMs now, Michael, but there's a layer referred to as MCP or ontology or where you connect the LLMs with -- in a much more structured way with the data set of the companies and you can set up some guardrails. You can make it more cost efficient also that way. And you can -- I think we can come back to that part.