Enento Group Oyj (ENENTO) Earnings Call Transcript & Summary

Welcome to Enento Group Q2 2026 Results Webcast. My name is Virva Vesanen, and I'm Head of Investor Relations and Strategy. I'm joined today by our CEO, Teppo Paavola and our CFO, Elina Strahlman. Teppo will start with the key highlights from the quarter, followed by business segment performance. Elina will then provide a closer look at our financial results. After the presentation, we'll open the session for your questions. You're welcome to send them in at any time using the webcast tool. With that, I'll hand it over to Teppo.

Thank you, Virva. Let's start with highlights from the quarter. Growth continued in Q2 with overall demand stabilizing throughout our segments. Swedish consumer credit continued to grow supported by volume growth. This brings us confidence that the market environment in Sweden has started to improve. Profitability improved significantly in Q2, and we have, therefore, specified our guidance, which I will present later today. We continue to sharpen our strategic focus, which can be seen, for example, in our recent M&A deals. During the quarter, we divested a Emaileri e-mail marketing business and acquired Swedish ownership data provider, Eivora, which strengthens our compliance services capabilities. Our organizational transformation has also continued during Q2, of which I will share more information soon. Overall, the strong start to the year continued in Q2. Even though the market environment remains uncertain, we are looking positively towards the following quarters. Let's then look at the key figures in more detail. Second quarter was strong with growth across all key figures. Net sales grew by 2.6% and reached EUR 39.9 million. And as said, all reporting segments grew as in Q1. It is good to note that excluding Emaileri, the group growth in Q2 was 2.9%. Profitability improved significantly with adjusted EBITDA increasing to EUR 14.6 million, up 11.2%. This improvement resulted in an adjusted EBITDA margin of 36.5%. Cash generation was strong and free cash flow amounted to EUR 8.7 million. This was supported by exceptionally high cash conversion affected by the Emaileri divestment, reaching 133.4%. Overall, the first quarter performance shows that Enento is delivering profitable growth, providing a solid foundation for the rest of the year. During this year, we have focused on building a winning organization and culture to drive stronger growth and profitability by clarifying roles and responsibilities. First, we moved into a country organization during Q1 and updated our executive management team. In Q2, we were delighted to announce the appointment of Alexandra Åquist as the Country Director for Sweden. She will join the company at the beginning of next year at the latest. In Q2, we completed change negotiations to adjust the organization to new country model. Negotiations concerned all employees in Finland and Sweden. The results were 32 terminated roles and 27 role changes. We continue to invest in commercial, technological and AI competencies in the organization. However, we expect the number of FTEs to remain below 350 in 2026. We are also introducing changes to our operating model. Our sales model is updated towards a more proactive growth-oriented model. This includes establishing teams targeting only new customers. In addition, we believe that we can access more growth through partnerships, and we are now enhancing that capability. In service and product development, we are resetting the way we develop our services. This work is led by our new Chief Product Officer. Target is to increase speed and return on investment in product development, also by having lighter governance. As a result of transforming into a country organization, multiple local operations teams are now combined into one for each country. The new organization structure is now in place and is expected to bring positive results going forward. Finally, AI is developing fast, and we aim to take maximum advantage of its possibilities. Examples of AI usage include using AI for product development, AI solutions introduced to product and service offering, meaning the way data is consumed and analyzed. AI usage in all internal operations is increased, and we are also aiming to reduce our technical debt with AI. As said earlier, we continue to invest in these capabilities. Many of these activities require new roles and recruitment is ongoing. During the quarter, we announced two M&A transactions. We divested Emaileri e-mail marketing business in Finland, and then we acquired Swedish company Eivora, which provides ownership data of Swedish companies. Both of these transactions relate to Enento's strategy work aiming at increasing growth, improving profitability and focusing on the core credit information and related services business to improve operational efficiency. Divesting Emaileri enables Enento to allocate resources more strongly to its core businesses and to the development of digital data and analytics solutions in the Nordic countries. Eivora, on the other hand, is related to building our compliance service offering with AI capabilities. Eivora has been earlier providing Swedish companies' ownership data to us, and now we will have that information in-house. This strengthens our ability to build high-quality compliance data and services for our customers. Both of these transactions have limited impact on Enento's adjusted EBITDA, adjusted EBIT, and cash flow in 2026. Let's then turn to key regulatory developments where we continue to see both risks and opportunities for Enento. In Sweden, the legislation affecting loan brokers changed in July 2025 and the deadline for loan brokers to apply for a banking license is now in July '26. We're seeing largest loan brokers and some smaller ones applying for licenses. And based on this, we currently expect only a modest impact on Enento. Brokers have been able to continue operating during the transition period, and they can also continue while the license process is ongoing. The second key development is the upcoming Consumer Credit Directive 2 or CCD2, for us. It is expected to come into force in November '26, although implementation will differ between countries. In general, we expect this to support demand for credit information in Finland and Sweden. Credit information requirements are also expected to extend to new players, including Buy Now Pay Later providers, creating a potential growth opportunity for us. Then let's move on to the business segment update. Finland grew 1.7% despite the weak market environment. Without Emaileri, the growth was 2.4%. Net sales amounted to EUR 18.9 million. Looking at the business drivers. Business credit performed well, supported by continued demand for financial risk services. Real estate also grew despite the weak Finnish real estate market, thanks to new services. In premium services for SMEs, we had successful marketing campaigns and sales efforts, resulting in a positive development in digital sales. Consumer credit information volumes, however, were flat compared to the previous year. Hence, even though there have been some signs of the economy improving in Finland, it was not yet visible in our Finnish consumer credit business. Profitability improved in Finland with adjusted EBITDA increasing by 4.9% to EUR 7.9 million. The improvement was mainly driven by net sales growth and a better gross margin, supported by the sales mix. Overall, Finland delivered moderate growth and improved profitability despite the still weak market environment. Sweden delivered good growth and significant profitability improvement in Q2. Net sales grew by 3.6% at comparable exchange rates and amounted to EUR 18.1 million. Growth was driven by strong performance in consumer information, supported by higher consumer credit volumes. Real estate services also developed well, benefiting from both increased volumes and a larger one-time sale. Business Information was weaker, mainly reflecting the SME transformation where premium revenue declines in the short term, but is offset by lower sales commissions. The SME transformation is progressing according to the plan. Churn has remained at an acceptable level and new sales order intake is improving. This supports more stable and sustainable growth over the long term. Adjusted EBITDA increased by 16.4% at comparable exchange rates and amounted to EUR 5.9 million. Profitability improvement was driven by net sales growth and operational efficiencies. In addition, sales commissions decreased following the SME transformation, while data acquisition costs decreased as a result of earlier savings measures. Norway and Denmark grew by 2.5% at comparable exchange rates and net sales amounted to EUR 2.9 million. Growth slowed down compared to Q1, but profitability remained strong. Growth came primarily from visibility and data-driven premium services for SMEs in Norway. Display advertising sales developed weaker during the quarter. At the same time, the acceleration of digital sales is progressing, and we expect this to support the segment's performance going forward. Adjusted EBITDA improved by 17.5% at comparable exchange rates and amounted to EUR 1 million. The improvement was mainly driven by net sales growth and improved sales efficiency. Then I'll hand it over to Elina for the CFO highlights.

Thank you, Teppo. Then let's start with an overview of net sales development in our segments. We had growth in all segments as well as also quarter-over-quarter growth in Finland, while Sweden and Norway and Denmark were on the same level as in Q1. And as Teppo also mentioned, we are especially happy that the development in Sweden continued on a good stable level, which is also very much visible in this picture. Then moving on to adjusted EBITDA. Adjusted EBITDA, as mentioned, improved significantly by 11.2% at comparable FX and amounted to EUR 14.6 million. Adjusted EBITDA margin improved to 36.5%. Profitability was supported by increased net sales, more beneficial sales mix and efficiency actions. Going through the line-by-line development. So materials and services, meaning our data acquisition costs decreased year-on-year and the development was supported by savings actions. We have taken targeted actions, especially in Sweden, to reduce data acquisition costs. Personnel expenses increased despite lower level of FTEs, and this was due to higher incentives. Change negotiations still had limited impact on the Q2 costs. Other operating expenses decrease was driven by lower sales commissions that were impacted both by SME transformation and also due to decreased sales in SME business Sweden. Also, IT costs were lower than prior year following the savings related to infra transition. We expect to continue to see savings in SME transformation going forward, but also the sales to stabilize. Also, good to note that especially in Q4, we, every year, have large one-off sales in SME business, Sweden, where commissions continue to be paid normally. What then comes to IT, we expect IT costs to remain stable, while savings being offset by modernization activities. We have some larger maintenance upgrades planned for H2. Then finally, capitalized production for own use was flat compared to prior year and krona supported the net sales and profitability development with reported FX rates. Moving on to cash flow. Free cash flow increased by EUR 2.1 million and amounted to EUR 8.7 million. The improvement was driven by improved operational results and lower tax and one-off payments. Investments remained on prior year level. Cash conversion was very strong, over 100%, but was impacted by a high amount of non-cash costs recognized in reported EBITDA. Emaileri's non-cash goodwill amortization was the largest, but also termination benefit provision recognized in connection to change negotiations will mainly be paid during the coming quarters. Adjusted cash conversion that excludes the impact from one-off payments remained stable at around 65%. Then lastly, key indicators. Our cash position was at EUR 17.5 million and strong at the end of Q2. Our committed credit facilities of EUR 30 million were fully unutilized. Net debt to adjusted EBITDA was below our target range at 2.5x. Gross investments were EUR 1.4 million and as said, roughly on prior year level. Adjusted EPS increased to EUR 0.35 per share, supported by improved adjusted results. And then finally, share of new services from net sales, that was 9%, remaining close to our target range of 10%. Then I'll hand over back to Teppo for the outlook and guidance.

All right. Based on Q2 results, we specify our outlook and guidance concerning adjusted EBITDA. Macroeconomic and geopolitical uncertainties remain. Regulatory changes in the Swedish lending market continue to influence the operating environment. However, the impact on Enento is expected to be modest. In Finland, the macroeconomic outlook is more subdued, but demand for Enento services is anticipated to remain stable. Supported by stabilizing market activity and improving conditions in Sweden, we expect Enento's net sales to grow in '26 at comparable exchange rates. Enento Group expects that in 2026 with comparable exchange rates, its net sales will grow by 0% to 5% and adjusted EBITDA will increase compared to 2025 with adjusted EBITDA growth exceeding net sales growth at comparable exchange rates. Thank you. Now it's time for Q&A.

Okay. Maybe we'll start with questions from the studio, please.

It's Matti Riikonen, DNB Carnegie. I'll take three questions one by one. First of all, regarding the new guidance, there was no concrete changes in the kind of exact numbers, but what do you want to message with the new guidance? What does it tell us?

So I think the important part is that EBITDA is expected to grow faster than sales. And this we had not specified earlier. So that's really the change.

All right. But given that most of your costs are still fixed. So if you get any top-line growth, there should be quite a good operating leverage in your business in the first place. So was this just necessary to kind of spell it out to the market that this is actually happening or something else?

Yes. Okay. So it is, of course, so that if there was a clear sign of sales clearly declining, then that would have been an issue like you say. So yes, I think it was helpful to specify that. And of course, we have now shown that the first 2 quarters that EBITDA is growing faster. So we just wanted to make that clearer. Otherwise, of course, there's no real change here.

And of course, I mean, we have had less favorable sales mix in the past years. Clearly, then also impacting negatively the profitability. So what we also want to highlight is that now, for example, the Swedish consumer credit situation has stabilized, it's showing growth. And we also expect the risks to remain moderate in terms of, for example, the broker regulation, which also supports the profitability on top of also all the actions that we have actually taken to support the profitability also going forward.

All right. Then secondly, regarding the Swedish SME conversion, you said that you have basically taken the measures and I assume that your partners, sales partners have also taken the measures to improve or increase their staff so that they would be able to sell more. So when do you expect that the new sales would also start to grow year-over-year within the new system?

So first, in terms of the profitability impact that will, as it was partially started in Q4, partially in Q1. So this will continue for some time when it comes to the renewals. Then when it comes to new customers, actually, because of this change, our sales partners decreased staff considerably last year, end of last year. And now the good sign is that they are now increasing staff. So it seems like the new model is working. Now exactly what the numbers are from there, what we did say already is that the last couple of months, we have seen sales pipeline and contracting activity working well. Now these are periodized over 12 months. So the dip that we had in Q4, Q1, we will be seen in our numbers still until Q1 next year.

All right. A follow-up to that. If we think about your cost base regarding the Swedish SME business, in '27 versus now '26 and assume that most of those sales commissions that you are paying this year will not be there anymore next year. So what would be the kind of cost base change in relative terms, which would benefit your profitability, of course, and I think that's the whole point of this exercise. But just to give a flavor of how much savings you could actually make, which we don't see this year, but which could affect positively next year.

So maybe I'll just, you can then add. But that's kind of the point here on the sales mix as well, is that the faster it grows, the more commissions we will pay. And in other words, the bigger the percentage of the sales that comes from new customers, it actually lowers the short-term profitability. And that's why this is one of the reasons to going back to your first question of why we have not been that clear about the guidance on EBITDA earlier. So this is the balance that actually that not in all situations, the relative profitability improves when there is growth. But do you want to?

Yes, we can expect, I mean, like basically, due to the periodization of the revenue and commissions, we can expect to see similar impact on the profitability also for the next year as we see this year, if we assume that the sales would remain the same. But as Teppo mentioned, since we pay commissions on new sales and we do want to get back -- new sales back on track, then, of course, that impacts the equation.

Right. And..

Actually, let me add one more thing because it's important for our future activities that then there's the -- one is the percentage of business that comes from new customers. But then part of that comes through digital sales. And the more we can increase digital sales, the lower the commissions will be because then that comes through the digital channels instead of the sales partners. So that's why we mentioned the digital sales also in the presentation.

Okay. And finally, when -- just to understand the big picture, what share of your current sales is coming through the sales partners and which is coming kind of through digital or your own initiatives? So what kind of sales split are we talking about? So how much of the base do you need to kind of resell again or renew?

I mean this basically relates. The sales partners relate to our premium and freemium businesses, but especially in Sweden. And we have told that the Swedish SME businesses is a bit more than EUR 10 million a year, and that's where the largest sales commissions come from. In Finland, we have much bigger own sales team that is then also responsible of the SME sales. Although we use some partners as well, but the cost is not that significant.

But of that Swedish EUR 10 million, how much did actually churn? And what is the kind of amount that you need to win back? Just to understand the magnitude of your sales and then the sales that need to be resold or where the partner is in a crucial role in actually making the sale back to you. So is it 50%?

No, it's not that high. It's not that high. It has been in the previous model, a bit over 20% that we need to then cover with new sales. Of course, we do believe and what we have also seen now with this new model is that the churn is lowering, and we do expect and take a lot of actions to get the churn on a lower level going forward as well. Of course, the previous model when you have always called that do you want to renew your contract is naturally such that results in higher churn as well. So of course, we do believe that the ongoing subscriptions will also result in lower churn. But that's too early to say where we will land at that.

All right. Thank you. So less than 20% at the moment. And of course, expecting that, that number would be coming down. Great. Finally, the third question is that you recorded quite significant kind of adjustment costs in Q2 related to the restructuring. How much is still left of those costs for the second half? And assuming that this was now a fairly large exercise compared to many previous ones, should we expect that the level of restructuring costs would be slightly lower in '27?

We currently don't have any further plans on restructurings. So of course, I mean, like one can assume that there may be smaller changes here and there, but at least bigger ones are now done. Then, of course, good to remember that on top of the change negotiations and restructurings, there was also a large non-cash goodwill amortization over EUR 4 million related to Emaileri burdening the reported results.

Okay. Then, please.

Yes. Roni Peuranheimo from Inderes. Maybe first about the CCD2 regulation that you mentioned. So how has your view regarding this changed? Has it like changed towards the risk or the possibility outlook?

So yes, this is mostly an opportunity because it increases the number of companies that need to do a deeper credit risk analysis. And so that's why now the risk is maybe more in the -- because it's new regulation, how exactly will it be applied in each country, and it probably will be applied a little bit differently in each country because also the credit register systems are different in each country. So that's maybe we just don't know how it's going to exactly evolve, but it increases the size of the market.

All right. Then about AI. So have you seen any like meaningful market dynamics changes due to that, for example, new competition or so on. So maybe talk about that generally.

Yes. So one, we kind of think about the different steps in sort of the value chain. One is just getting access to data and where Generative AI is good, it's good at making sense out of unstructured data. However, it also guesses things and sometimes wrong. and which, of course, means that when you do important or regulated decisions, the data still needs to be well structured and verified and good quality. In other words, you need a source of truth or a system of record that you can trust, and that's what we are. So that's at the stage of the kind of data acquisition and sort of data manipulation before then going to analytics. Now in analytics, it seems to be that outside regulated areas. So if we think about, for example, our business information services, there are lots of new tools to do analytics. And so we want our data to be available for that so that when people use data differently because of AI that we are still there where they go and look for it. So that's one area where we will do product development. And so then kind of the sort of the decisioning systems where, for example, banks would have their credit strategies and so on, those are still very much embedded inside the banking infrastructure, and we have a lot of those customized solutions. But there, again, it's -- when you get out of the financial services area, then we can see differences there. But going back to the first point, which is maybe the part that is being talked about most, whether you can now, for example, do credit decisions, which is our largest business with data that just comes from somewhere is still very challenging and will continue to be challenging. So good data is needed.

All right. Then one smaller technical question about the one-time sales in real estate services in Sweden. So are you able to elaborate on the size of that?

Well, it was, of course, significant to that specific business, but not significant on group level. So sizable compared to the quite small size of that business.

Yes. I'll just add that we have quite a bit of these where a customer does a one-time, and it looks like a one-time sale, but then they come back the following year or every 6 months. But it's recorded as onetime every time because there isn't a continuous contract for that. But for example, the -- let's say, again, if we take an example in banking, that the banking supervisor or regulator tells to the bank that you have to check this data every year. So they may come to us in March or April, and then it's either in Q1 or Q2. So that's kind of part of the dynamics.

All right. Then one more question about the growth investments to digital sales growth in Denmark and Norway. So how meaningful are these going forward? And should they -- or will they be seen in the profitability of the segment?

Well, I mean, overall, when it comes to the amount of investments, we of course, hold to the full year guidance on group, and it's more like how we allocate the money into different areas in terms of investments. These type of investments do not tend to be very high cost investments when we improve the digitalized capabilities. But of course, means that we will probably allocate a bit more to those markets to support that development.

Yes. Now, also the organizational change was much bigger in Finland and Sweden. So in terms of specific on the commercial side. We have quite a few open roles in sales in Finland and Sweden, much more than in Norway, Denmark. So that's an important part of the investment, which, of course, is there to support growth.

All right. No further questions from me.

Okay. Thank you. Then let's move on to the chat. There are several questions from our other analysts. So let's start with Sanna from Nordea. One other question regarding the guidance. So does this mean that adjusted EBITDA will improve more than 5%?