Omda AS (OMDA) Earnings Call Transcript & Summary

Good morning, and welcome to Omda's presentation of the results for the second quarter of 2026. We have 2 important themes today. We have the mission criticality of our software platforms and the predictable business. And I am Sverre, the CEO of Omda. And as usual, I have my colleague and CFO, Einar, beside me, primarily to make sure that I don't get too optimistic. Today, we are going to talk about 2 important things in our business. It is the division between Specialised Healthcare and Emergency. That is vital when it comes to understanding Omda's business in the next years. So we divided this business into these 2. And I think let's start by letting Einar explain the rock and roll version of our numbers for the second quarter. Einar?

Thank you, Sverre. The numbers overall, income of NOK 127 million and with an EBITDA margin of 25% and an organic growth quarter-over-quarter of 9%. So overall, strong numbers. The Emergency comprises 44% of the total income and Specialised Healthcare, the other main market, 56%. You see a slightly stronger number for Specialised Healthcare than Emergency. That is the usual fluctuations from a quarter-to-quarter and from year-to-year. But overall, strong numbers. We will dive into the details a little later. Stay tuned.

Okay. So let me then explain the fundamentals of these 2 market segments. Specialised Healthcare is the foundation of Omda 20 years ago. And just to shortly explain the 5 areas there. Woman & Child is about pregnancy, birth and the follow-up after. And this is also a value chain software platform with different components doing different things for highly critical aspects of the birth and Woman & Child healthcare. And then on the right-hand side, we have a similar, completely different when it comes to medication management in cancer. But this is also value chains and software platforms that support different user groups and the steps between them. So of course, when you -- if you get cancer, I hope you don't, you want the best medication treatment you can get and functions to design and calculate the cure, to give you the cure, to produce it correctly in the pharmacy and also to get back to administer the cure with the nurse and then, of course, the follow-up from oncologists and your own app to follow up also. So this is a typical similarity between these platforms, but they are completely different, of course, when it comes to what it does for you as a patient. And then we have on the left corner in the bottom there, so-called Connected Imaging, which is also a combination of complex platforms. One is infrastructure to share images between regions in the country. And then, of course, on the top there, similarly, the highly specialised component, for instance, within cardiology or skin cancer. So all of these areas have their own specialties. And then in the middle there, LIMS or blood management. Of course, that also is a critical thing for hospitals. You collect blood and cells, tissue from the citizens, you have to handle it, storage, et cetera, and then, of course, give these products to patients in critical situations in specialised hospitals. So that is also a typical 50-year-old business with a long-term market leadership here in the Nordics. And then Health Analytics, which is, of course, a different thing when it comes to processing. On the other hand, the data is critical, critical to researchers, critical to manage even national registers, making sure that you have the overview and the ability to use the data to handle your business. So all of these are part of the -- what we call specialised healthcare. And I think that is very important for you when you look at our numbers and the development and the predictability of the business that this is what it's all about, critical for everyone. And similarly, critical also here when it comes to emergency, our other leg, so to speak. And to explain that value chain, let's start on the top left corner, planning & preparedness. What is that? Of course, in a society, you have services that people rely on a 911 call, for instance, you have to plan what type of resources are actually there to help you. So that is also software types to analyze this and to plan it properly. For instance, when it's the 17th of May in Norway or 4th of July in the U.S., that type of happening is, of course, giving you another planning situation than other days of the week. And to the left, down to the left, you'll see that the most important part, of course, when you call in is that the operator that helps you actually have the tools and the ability to make the decision fast and to distribute and dispatch the right resource at the right timing. And of course, when you see the on-scene response, what is that? Well, on the on-scene response, normally, you have 1 out of 3 types of resources. It might be the healthcare part, the fire or the police or sometimes or many times actually, it's all of them, for instance, in a bigger accident. So that means, it's relevant for the value chain that you have components that handles all of these situations. And then you have the transport and care. In an ambulance, you have 2 user groups. You have the driver in the car that has to come to the right place as soon as possible. And then, of course, you have in the back of the car, the ability to register and handle critical information so that when you get down to the corner here on the right-hand side into the hospital in the emergency room that the preparedness of those that receive the patient is actually able to help you in the best way. And then again, on top left -- top right, you will see we are using the data of all of these steps again to get back to the beginning planning & preparedness. And this quality is critical for society. And as you know, we are in many countries with this. And after the acquisition of Saab Public Safety Solutions, we have, of course, strengthened this value chain very, very much. And that is probably one of the most important things when it comes to what we have achieved now through the second quarter 2026 in our business is the additional strength of the platform here, a long-term important platform for customers. But not only that, if you look at what happens in the market, earlier on, we have important national and regional installations of these platforms. One is the SOS Alarm in Sweden as one example. A regional example, number 2 there is Valencia in Spain. And those 2 are handling millions of calls every year is, of course, the critical infrastructure. And we have other countries like Greece, Moldova, Croatia, Slovakia and Montenegro as well. But in the second quarter 2026, the signature when it comes to acquiring the Saab Public Safety Solutions, we have increased the annual sales next year in the U.K. from 2% to 15% of our business. And this is also important because the regional customers and even national entities that we serve here is well as critical as many others, and it gives us a lot of opportunities when it comes to use our added platform software components to current customers and new customers. So all in all, it has been for this quarter, probably the biggest highlight in addition to our predictable business is the fact that we have made this acquisition. And now, Einar, it's time to go through the numbers.

Thank you, Sverre. Let's have a look at the numbers and dive into the details. As I said, the reported revenue for the second quarter was NOK 127 million. That represents an organic growth of 9%, a reported growth of 5%. And for those of you who wonder about the distance, we had headwinds from FX this quarter. As most of you know, you see that the Norwegian kroner strengthened toward almost all our trading currencies. And sales in Norwegian kroner sales in other currencies. Other currencies represent roughly 85% of our sales are in not Norwegian kroner. So we are susceptible to fluctuations in currencies. Profitability, a stark increase from the second quarter last year, NOK 23 million last quarter and NOK 32 million this quarter at an EBITDA margin up from 19% to 25%, but maybe even more important, should add that the CapEx was down to around 7% this year, so giving us a cash EBITDA of 18% versus 9% last year. So we are indeed heading in the right direction at approximately the speed that we envisaged. The quality of earnings remains high. Recurring revenue, 97% in reported numbers and the software share of recurring revenue is 76%. Professional services back on track this quarter, a little low in the first quarter this year, back on track this quarter. And again, remember that professional services, they are also, to a large extent, recurring in nature. So we assume approximately 90% of the professional services are indeed recurring. And it's all about the predictability and why is our business so predictable, Sverre? Can you give a few examples on that?

Absolutely. And I think that is key to understanding Omda. And if you look at the platforms and the criticality of what it is, the whole design of these platforms is part of a very, very important thing in society. So every day, every second, mission-critical daily work is handled with these systems. And also, they are certified as part of how the quality of each operation is. And that is also why the ability or the wish from the customer side to change things is not there. They want to develop things, but not change these things. So -- this public sector customer base is, of course, dependent on us, and it's a large responsibility for us, but they don't want to switch these systems because it's not a good business case for society. So the embedded by design is really how these platforms are for the customer. And then it's not only the technicality of the systems, of course, but it's also the relation over decades with these customers. The long customer relationships is there because since the critical platforms are there for the customers, they depend on it, it's also a big responsibility for us to handle these systems and collaborate with the customers to keep also modernize systems, given new components over the years to support the value chains. So this is what creates the repeatable, profitable organic growth, and that is key to how we see our next steps in our future. And also when we talk about recurring revenues, it's not only software recurring revenues, it's also the recurring or the repeatable business when it comes to dependencies to our services. For instance, we have to help with training, integrations and other types of services to help our customers continuously. So we are focusing on 2 principal markets, Specialised Healthcare and Emergency. And both of those and the consequence of that strategy is how we end up with this highly predictable business that we have. And the predictability is not only, Einar, about the second quarter and the quarters ahead, but it's also a long-term predictability. So maybe you can then focus on talking about the future and our guidance.

Future, that's what lies ahead of us. And the -- then it comes to M&A, so the real growth engine in Omda. Here, we try to illustrate the 2026, where we're going to end up organically, the organic growth and the acquired growth. This is the pro forma numbers. And as we said, the Saab SAFE transaction, we see that the continued business and continued business is a bit higher than first anticipated. So that is -- so 2026 bars to illustrate if we had owned the Saab SAFE business for the whole year. But that would take us to roughly around NOK 600 million in sales. And then we will add that. So that will be the new base heading into 2027, and then we assume that we will continue to do acquisitions. We said when we announced the Saab deal that, that was the first announcement we made on M&A this year, not necessarily the last. I think I can repeat that statement. So we will continue to focus on M&A, profitable growth and look for opportunities there. At the same time, on the existing business, we continue to guide on 28% to 32% EBITDA margin. But mind you that we say that CapEx is going to go down from 10% of total sales to 5% of total sales. And looking further ahead, so it's not only about 2026 and 2027, it's also about where we will be in the next 5 years. We repeat our statement. We continue to see organic growth between 5% and 10% and inorganic growth, i.e., growth through acquisitions between 10% and 20% or base. And we continue to see that going forward. We have a large database of possible transactions. And again, we create value chains the industrial way, and we have a lot of opportunities out there, and we are out there hunting for them. So that -- no question about that. Okay. But Saab and that deal and the acquisition is really transformative for us, Sverre. Maybe you can go into details exactly what does it mean? What is the change?

Yes, I think that is important. And as I mentioned, the most important incident in our second quarter. First of all, as I mentioned, the public sector in the U.K. becomes a very, very important part of our business. But also, we create a broader platform that we already have from before, which is becoming one of the strongest in Europe when it comes to a complete value chain for the whole emergency ecosystem. So we are taking over 75 people that have been working many of those for many, many years, creating this very strong platform called SAFE and the SAFE product we get there and the competence is going to make us much, much, much stronger. We expect to close this now soon in the fourth quarter until then, Saab is running the business, but we expect the closing to proceed as planned. And then, of course, most importantly, for you to think about what's going on in '26, '27 and the years to come, that the recent proof point of this acquisition, which is important, the fact that additional contracts with customers have been entered into SEK 60 million recently, which changes our view to the ongoing business in 2027, increased much more than we published -- when we published the acquisition in June. So we now think the estimated annual revenue base will be above SEK 100 million and also the ability to cross-sell between our current business and also to use our people together in one business unit is going to create a lot of things for us that becomes important when it comes to our profitability and growth. So -- and another thing in addition to this acquisition that is important when it comes to our profitability is, of course, the AI situation now, which is a great opportunity for Omda. You have to take care when using AI and use it responsibly. However, there are a lot of things we can do. And on top here, you see we deliver these certified software components that are mission-critical, as I have explained thoroughly. And that means nothing is going to happen on the customer side. It's not going to change very much when it comes to use of AI other than added functionality somewhere when the customers want it. The most important thing for us will be the development cycles, the testing, documentation, et cetera, the efficiency, the ability to work much more effectively is there. And we see that 12 months ago, a few programmers used AI tools. Today, everyone does it. And what we're doing now is, of course, creating a platform, a group-wide platform that secures handling all of these security mechanisms, the economy of using AI, et cetera. So a very structured approach to AI from our side. So what you saw from the second quarter is a slightly lower investment in software than we had guided. And I think that is a taste of what's going to happen with the use of AI here with our people in Omda because all of the processes going on, there are a lot of those that AI has a role when it comes to -- especially when it comes to like testing, documentation, et cetera, which makes it easier and more efficient. And then, of course, we have, as Einar mentioned, the ambition here is to use AI also to secure the trend we have publicly guided on, the reduction of CapEx from 10% to 5%. So that is also a part -- AI is part of our capital allocation. And Einar, talking about capital allocation, maybe you can elaborate a bit on other types of capital allocation.

Capital allocation and capital. Capital allocation, it's about putting the money where it makes the most out of it and also to have capital and speak of capital, we have observed in the market that the market for bond financing is attractive and the current OMDA-02 PRO is trading favorably. So we will continue to -- we monitor the market very closely and continue to monitor that market and to evaluate refinancing. Lower interest cost is, of course, attractive to us. That will improve return on investment and improve return on capital employed and return on equity. The investments we will look for continue to be target acquisitions, add-ons to customers, bolt-ons, AI-enabled productivity. But all in all, capital allocation in Omda is build or buy, either we can build something that means CapEx or we can buy something. And very often, we do because when we buy something, it comes with customers, it comes with income. But the whole thing is about discipline. Okay, Sverre.

Yes. I think all we talk about here is, of course, also looking forward. And as you will see that our plan going forward is, of course, focusing on the organic growth that we have. And the last 10 years, it has been between 5% and 10%, some slightly above and some slightly below, but on average, that is what's going to happen in the next 10 years as well. And we have said that 10%, 20% per year when it comes to acquisitions is what we go for. And we also have seen, and you've probably seen and Einar will also explain the gradual increase of EBITDA in the second quarter, the last 3 years is, of course, to get to an average of 30% and above over time. So what we do now is, of course, focus on the activities when it comes to reducing the CapEx, the capital allocation when it comes to our own software and not to stop innovation, quite the opposite. We see that we will innovate faster and better with the new tools and the responsible use of the new platforms. And then, of course, our portfolio, it's very important for all of you that we can model our future in the next 5 to 10 years that the focus we have on Emergency and Specialised Healthcare, that is what creates this predictability and the ability to plan properly over years. And of course, we will continue with a decentralized model as we have, where every business unit leader is following the cash flow and the cash EBITDA on every business unit every day makes us also be able to increase the cash from operations. So Einar, you can explain what has happened when you look at the quarters of the last years and where are we heading?

Yes. Where are we -- where are we heading, a very good point. I mean, a quarter, again, you should keep in mind that Omda is not really a quarterly business, and you have to look at the longer trend. We are in it for the long term. But I think just selecting the 3 quarters, Q2 '24, Q2 '25 and Q2 '26, we see a very, very -- it's a visible trend. It's no question where we're heading. We see from -- on the left bar is the EBITDA and the right bar in the groups, the cash EBITDA. And we see from 10% EBITDA margin in 2024 second quarter to 19% in '25 to 25% this year. The trend is very clear. And then cash EBITDA, meaning CapEx, we had 0% cash EBITDA in '24, 9% in '25 and 18% in 2026. So the trend is very clear. And we think this will continue. But again, we said our guidance is 28% to 32%, and we said that CapEx should go down from 10% to 5% over the years. So this is the direction we're heading in, and we're making good progress. So to sum it up, what does Q add to the Omda story, a very predictable and profitable organic development, transformational Saab business. The acquisition was signed that really redefines us once again from Norwegian company to a Nordic company, from a Nordic company to an international company, European company. We think U.K. is still in Europe. Very clear portfolio centered on 2 principal markets, Specialised Healthcare and Emergency. We continue to explore the possibilities of AI, and that is also a prime driver to bring down CapEx and increase productivity and launch new initiatives to the market. And the 2026 guidance, that is repeated once again. But bear in mind, we have had some headwinds from currency. So you see that we now guide that still between NOK 500 million and NOK 525 million, but probably at the lower end of that as we have some headwinds from FX, but that's the only thing. FX, just like to mention that it has an impact on the top line. But to a large extent, we are also -- we have a natural hedge since a lot of the cost is still in the same currencies. It's not a perfect hedge, but it's a good hedge. But on the margin itself in percent, it gives a very little impact. Okay. So what lies ahead of us? On operations, in one word, actually two, Kaizen. It means continuous improvement. We will continue to focus on organic growth and opportunities there, and we will continue to look for areas on the cost side to see where we can improve the cost to improve the margin. But the real growth comes through focused M&A. We source our own deals. We establish and maintain relations over many, many years. And we strike when our conditions are met and we can agree a sensible deal for all parties. So whether you are an investor looking for a healthy investment or you are an entrepreneur looking for a better home for your company, welcome to Omda. We are more than SaaS and software. We deliver critical infrastructure to society. Okay. That was it. Let's move on to Q&A and see what we have. And we have some questions already. And while we address them, please continue to type in your questions, and we will attend to them.

So the first question here is in Norwegian, it's from KMD. I'll translate it to English. Congratulations on good numbers. Thank you. When do you expect that capitalized development will be down at 5%? We have said that we have been 10% last year, and we said that gradually over a 5-year period, we said we will shave it down 1 percentage point per year. So this year, we guide on 9%, next year it should be 8%, et cetera. So in the second quarter, you see we're actually a little below that. So we're not saying that 7% will be for this year, but it's a sure sign of things to come. And this is one for you, Sverre. It's about public tenders. And the question is, can you please comment on Omda's success ratio on public tenders? I saw, for example, Frequentis winning the NKS110 over Omda, but there were also some wins in Sweden, for example, with Dermicus.

Well, I will say that, first of all, that when it comes to tenders, our primary approach to growth in the market is to acquire systems that are there as part of an infrastructure over many, many years. And then the organic growth from Omda in our budget for, for instance, '26 and '27 is based on additional sales to current customers. So that is the main strategy. That means that tenders, yes, we are also participating sometimes in tenders, but we don't measure primarily our business based on tenders. And the reason for that is the fact that the type of a business we are in, most of our software platforms and systems are there for many, many years and decades. That means the tendering is a few. There are examples. A couple of years ago, we won this national tender of blood management in Denmark. We have winning additional contracts during the year, for instance, also in Stockholm on blood management. So there are examples, but there are sometimes years between them. So I think the main answer to that question is that our main focus on the business is not winning tender, and we don't measure tenders as such. We participate normally in tenders when it's very relevant to some of our customers, and they want us to participate. So that is going to continue to be our main strategy.

Thank you, Sverre. We have 6 more questions pending, but just type in more questions if you have any. One from Javier here, and that's a simple one. Is it Omda with like spelled name or with capital letters? It's the first one, it's Omda. It's not an abbreviation of any kind. So it's Omda, capital O and small m-d-a. And a question from [ Hjalmar ] on LIMS and Blood Management coming up and the margin and development there because obviously, if you look at -- if you look at the breakdown per business area, you see that there's a huge difference there in the businesses. Some have strong organic growth, some have less, more modest organic growth, some use a lot of CapEx, some don't have any CapEx at all. So this is an observation on LIMS. And the question is LIMS has run with a very thin EBITDA minus CapEx margin, so EBITDAC for a long time with CapEx near 20% of segment revenue. Can you give some color on this? So why is that? Growth is obviously strong. So I assume it's still in an investment phase. And what is the normal EBITDA minus CapEx?

That's a very good question. And also it contains not only a question, but it's a conclusion when it comes to investment phase. So the business -- the first customers came in the mid-60s of this business, and it has been -- has many decades history and it's going to have many decades ahead when it comes to collaboration as a leading software platform for critical blood management in the Nordics and also with customers outside. And yes, when it comes to the short term and short term, in this case, I mentioned the national contract with Denmark, for instance, although they also have had system in production for more than a decade, they are creating a national platform rather than a regional platform. And that process itself is a multiyear, around 5-year process. And in those -- in that period of 5 years, of course, the business will have to also invest in software and to do things differently when it comes to handle the ordinary customers. So the simple answer is that, yes, it is still as planned in an investment phase and the ordinary business should, of course, as we have said as an ordinary KPI, should perform 30% EBITDA at least and 20% cash EBITDA at least. And I think this business, based on history and the leadership in the Nordics, will also have a potential to grow much further beyond that in the years to come.