Siili Solutions Oyj (SIILI) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Markku Savusalo, and I work as the Interim CEO of Siili Solutions. I will go through today, together with Tuomas, our first half 2026 results for you. But first, if there's some people in the audience that are not that familiar with Siili, some basic facts and some -- also about our offering. Siili is an AI partner and our key markets are Finland, U.S., U.K. and Germany. Our key client sectors are services, industry, public, finance and automotive. We do have specialized Siili companies, subsidiaries, Supercharge, VALA in the quality assurance, Siili Auto and Integrations Group specializing on integration. As you can see, Siili offering is covering the all -- throughout the product life cycle of digital services, all the way from advisory and design all the way to the managed services. We added, about 1.5 years ago, this advisory team in the AI area. And now we have also paid special attention on managed services mentioned as a continuous solutions in this slide. We have a strong and diversified client base. Here are some examples from the private and public sector from both from domestically and internationally well-known names. Then if we go a little bit on the second half and what are the recent agentic solutions that Siili has been implementing or is implementing. The first one is we're doing work for the large industrial manufacturer on legacy modernization. More than 300,000 lines of code will be modernized using AI agents on this work. We also have done AI agent for customer service for LähiTapiola Finance. It's a RAG-based AI agents running on Microsoft Azure. Then we have deepened our relationship with Pihlajalinna in the area of data and AI during this first half of the year. The relationship goes back already for 2 years. And then one of the most significant ones is the fourth one, the global industrial player that we are doing a comprehensive AI transformation. Siili co-designed an AI native software development life cycle capability set to gain speed and efficiency for their development. And then the Aalto University, where we have done enterprise-grade AI search. Our strategy remains the same. There are three elements on that. First one is the community of top talent. That's what we want to provide for good talented people. We want to gain significant growth in data and AI business. And thirdly, we want to be a pioneer in AI-powered development. We have done a lot of work and investments on our personnel for their -- on their competencies for AI native way of delivery. And we built on our values, Ambition, Humane, Joy and Responsibility. Then if you look at the highlights from the first half and then second quarter of 2026. We have put a lot of effort to crystallize our offering to better match the market demand. And also, we have strengthened our sales team. We have been able to get important wins in new client projects towards the end of the second quarter, both domestically and internationally. We also continued group-wide actions to improve profitability and boosting sales. We announced a change of Siili Solutions CEO and the process for appointing a new CEO is still ongoing. And we have strengthened our strategic partnership network on -- we have now recognized partnership status with all three hyperscalers, Microsoft, Amazon and Google. And then we have also added new sovereign cloud partners. Then if we go to the numbers on the first half, revenue was EUR 50.1 million, adjusted EBITA, [ EUR 0.4 million ] and share of international revenue was 26.6% on the first half of this year. If we look at the second quarter key figures, the revenue resulted EUR 24.4 million, adjusted EBITA minus, EUR 0.2 million, and the share of international revenue was a bit higher, 27.6%. Then first half financials, I will hand it over to Tuomas.

Thank you, Markku. So hello, everybody. My name is Tuomas Toropainen, and I'm the Group CFO of Siili. So let's go through the first half 2026 financial results. So starting with our revenue performance, where Siili had a challenging first half of the year, but we started seeing some positive signals in stronger sales towards the end of the [ second half ]. So the picture on the top is showing Siili's revenue development split between the first half of '25 and the first half of '26. During the first half of '26, our revenue was EUR 50.1 million and respectively, minus 13% compared to the first half of '25. The picture below is showing our quarterly revenue between the second quarter of '25 and the second quarter of '26. In the second quarter, the revenue growth was minus 11.8% compared against the second quarter in 2025. It goes without saying that we are not satisfied with the revenue performance of the first half of 2026 and actions to boost our sales performance are already underway. So moving on to the international revenue share. The picture is showing the revenue share of our international operations. During the first half of 2026, international revenue share in euro terms decreased by minus 11.4% compared against the first half of 2025, while the relative revenue share increased slightly from 26.1% to 26.6%. Growing the share of our international revenue remains as one of our key priorities. Then profitability. The revenue decline affected H1 2026 profitability considerably. Our H1 adjusted EBITA was minus EUR 0.4 million, while Q2 was minus EUR 0.2 million. So the quarter-to-quarter result in 2026 remained moderately flat. During Q2, we initiated heavy cost savings actions, which are not yet showing in our -- in full in our Q2 results, but are expected to improve profitability considerably during H2. We remain determined and committed to continued strong efforts to improve our profitability towards our long-term financial targets. Then capacity. Our capacity at the end of H1 was approximately 929 employees and subcontractors combined. We have continued to adjust our capacity to match current market conditions and demand. Our focus remains in improving our operational efficiency while retaining recruitment activity in our strategic core areas. If needed, temporary layoffs give us flexibility to respond to changing market conditions during the second half. Finally, a review to our balance sheet. So we continue to retain strong financial position and a healthy balance sheet. Net debt to EBITDA increased as a result of declining revenue and profitability performance. Our equity ratio grew to 51.6% from 49.9% the year before as balance sheet total liabilities decreased year-on-year, while equity held up relatively well despite the weak results, reflecting the moderate dividend payout. Our return on investment and earnings per share also reflect the dip in profitability, but are expected to recover during the following quarters. Overall, Siili still has a good financial position to move forward with the strategy execution in the second half of 2026. Thank you very much. And I'll now hand it over back to Markku, who will tell you a bit more about the 2026 priorities. Thank you.

All right. Let's move on for the priorities for the second half. Yes, we continue to focus on ensuring profitable growth and strengthen the strategy implementation. We believe that we have the right strategy. And what we did last year, we reorganized our sales organization, and now we have hired new people and strengthened our sales force, and that is showing positive results towards the end of the period. We believe that we are on the right track with our actions to strengthen our offering. We have done a lot of work to crystallize the offering to better match the market needs, especially in the area of AI and better meet our client current needs. And this work continues towards the end of the year. We have a strong focus on international growth. We're investing in acquiring new clients as well as extending the existing client relationships. Then if we look at the guidance, which was updated on 6th of August last week. The new financial guidance of revenue for 2026 is estimated to be from EUR 95 million to EUR 105 million and adjusted EBITA, EUR 0.5 million to EUR 3.3 million. Our long-term financial targets for the period of 2026 to 2028 remains the same. And now we have time for the questions.

Thank you. So we have -- we're seeing three questions coming through at this point. So first, starting with, "Have you seen average AI project size growing over the past year? Also, are you seeing clients preparing for AI projects, for example, with data and IT infra-related project works?"

Yes. We have seen that the cases that we see in the area of AI has grown. Last year, I think there was a lot of like getting experience and having like the spots or certain proof of concepts. And now I think this year, we're seeing much more significant cases. And like I had these references, the fourth one is the most significant one that we are doing for the global industrial player.

And the second one, "Could you provide some color on how large share of your business is in growing AI projects? And what is the growth pace in such projects? You don't typically disclose a split exactly, but now any color which..."

Well, certainly, it is growing and more and more projects that we do, whether it's AI modernization or any kind of a development, we are certainly using AI tools. So I think it's rapidly growing. But like you said, Tuomas, we are not providing the exact numbers.

Correct. Yes. And then, "Customers reducing their spending on Siili services, is there any common denominators to point? For example, certain services or competencies or customer segments."

These are pretty much the budget cuts that they had. Some of them are preparing for the new wave of AI and preparing for that and then some of them may struggle or on the budget-wise, there is no one [ nominator ] or one competence area. But unfortunately, we had those in the first half, which were lowering our revenues.