Spir Group ASA (SPIR.OL) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to the presentation of the third quarter 2025 for Spir Group. I am Per Haakon Lomsdalen, Chief Executive Officer of Spir Group; and our CFO, Line Cecilie Stenseth, will join me in a few minutes. It is great to stand here and present a strong third quarter where we delivered across all key areas, both operationally and financially. In addition, we have made significant progress in our transformation, where simplification and strategic focus are the cornerstones. In the third quarter, we successfully divested Sikri, making Spir a pure-play real estate data and software company. In October, we announced the acquisition of Prosper AI's Real Estate Broker Solutions. These 2 transactions are clear proof points of our strategic direction and targeted M&A approach. We will talk more about this in this presentation, but we will also present our new financial targets. Spir is a growth company and the chart to the right showing pro forma figures after the sale of Sikri, shows 11% revenue growth. We have increased revenue steadily every quarter. At the same time, we see a strong uplift in profit with cash EBITDA margin expanding over the past year. Let me take a minute to talk a bit about what lies behind this. We have built up unique domain competence within real estate and geoinformation, and we also have unique access to property data and geoinformation. This means that we can create excellent solutions, streamline mission-critical processes and deliver real value. The real estate sector is in the middle of an intensive period with digitalization, and we are at the heart of it. As an essential partner with software at core, our business model is scalable, and we drive growth through higher revenue per property transaction, new customer acquisitions and upselling of our SaaS solutions. I will let it to Line to go through the financial details and segments, but let me talk -- let me walk you through some business highlights. A common theme this quarter is our ability to scale solutions and deepen customer relationships through new products and services. A good example includes 15% growth in our [indiscernible] solution, 17% growth in [indiscernible]. iVerdi is broadening its offer. And in Q3, we launched an integration between iVerdi and Boligmappa, which streamlines the property sales process and improve security. Further, we are expanding the network and real estate agents can now order home inspections for nearly 70% of all home sales in Norway. I've already mentioned the acquisition of Prosper AI's Real Estate Broker Solutions, which strengthen our offerings to real estate professionals and helps our customers save valuable time when preparing sales prospects. As a part of our simplification agenda, we also divested Hjemla in the third quarter. Looking at R&D, data-driven products with AI at their core are our focus. A couple of examples are mentioned here. We are also developing a solution for forecasting and recommending future maintenance and renovation needs together with industry partners and research institutions. The project is supported by a grant from the Research Council of Norway. I would also highlight that iVerdi launched a new AI assistant in [ EVIT ], which improves report quality and reduces the number of claims related to home seller insurance. Spir is committed to create strong synergies between our services and data. We integrate with AI to improve quality and drive better results for customers in insurance, surveying and real estate. The result is less errors, less disputes and hours of manual work saved. Our AI checks report quality, compares them with seller declarations and send structured data straight to real estate agents, ready to create sales materials with Ambita's AI engine. All is developed in-house to create real value for professionals in insurance, surveying and real estate. Spir has been building trust in the property market since 1987 and is now accelerating that journey, powering by AI. Now let me hand the word over to our CFO, Line Cecilie Stenseth.

Thank you, Per Haakon, and good morning. In a moment, I will go through the financials and the development in our segment. Just as a reminder, we use Norwegian kroner as reporting currency. All the financials presented are on a pro forma basis, which means that Sikri is excluded from the financials since the company was sold in July, and iVerdi is included on a 100% basis in both the 2025 and 2024 figures. Our revenue continued to grow well with 6% year-on-year in the third quarter. The growth rate is slightly lower than in Q2 as the number of properties listed for sale in Norway declined by 2% in Q3 compared to strong growth in the first half of the year. In this context, Ambita's 7% growth is particularly impressive. This positive development is driven by higher revenue per real estate transaction, supported by the introduction of new products and services. iVerdi and Boligmappa are relatively small, but the growth is strong. iVerdi increased revenue by 21% with transaction-based revenue growing most driven by condition reports and other valuation reports generated by more than 700 valuation companies in Norway. There was a 7% increase in reports in Q3 2025. Boligmappa grew its revenues by 15%, mostly driven by subscription revenues towards B2B customers. At the end of the quarter, Boligmappa reported annual recurring revenue of NOK 55.6 million, up 5% year-on-year. Metria's revenue was flat year-on-year in the quarter. Transaction-based revenue grew by 12%, supported by the improving real estate market in Sweden. On the other hand, revenue was affected by the EU imposed Open Data framework in Sweden, which encourages the public sector to provide data freely and in machine readable formats, resulting in a 14% decline in subscription-based revenues. This development was expected as the corresponding COGS has also been reduced. We are increasingly focusing on creating added value through data-driven services, and we track gross margin as a key measure of success. This chart shows that we have steadily increased gross margin every quarter over the past year on a rolling 12-month basis. In Q3, gross profit increased by 17%, resulting in gross margin of 54.6%. The improvement was driven by lower costs and growth in high-margin products. Metria was main contributor, increasing its gross margin by 6 percentage points, mainly as a result of reduced COGS following the introduction of Open Data in Sweden. Cost control remains tight. Our total operating expenses increased by 6%. The chart shows a shift from other OpEx to personnel costs as we have reduced the use of external resources, particularly in Boligmappa. At the same time, CapEx is reduced and represents a smaller share of the total costs contributing to the increase in personnel expenses. The good top line development and our disciplined cost control results in strong profitability. Adjusted cash EBITDA, defined as operating profit before depreciation and amortization minus CapEx is the KPI we focus most on when it comes to assessing our operational performance and as you can see on the chart, it grew by 52% to NOK 27.5 million year-on-year. The adjusted cash EBITDA margin was 11.6% compared to 8.1% 1 year ago. All segments delivered solid improvements with a significant increase in adjusted cash EBITDA across the group. Ambita and Metria both showed strong growth, each contributing around NOK 3 million more than last year. Boligmappa reached an important milestone with its first quarter of positive adjusted cash EBITDA and iVerdi continued to improve, reaching NOK 700,000 compared to NOK 100,000 last year. We have included a chart on rolling 12 months cash EBITDA development, and you see improved growth every quarter and a significant lift of 446% to NOK 71 million in the third quarter this year. We completed the divestment of Sikri in the third quarter with gross proceeds of NOK 822 million. We also paid out an extraordinary dividend of approximately NOK 324 million. Operational cash flow was strong in the quarter with free cash flow of NOK 12 million, up NOK 8 million compared to same quarter last year. As a result, we now have a very strong financial position. Net interest-bearing debt is close to zero, and we paid down gross debt of NOK 476 million in the third quarter. The reduced debt will naturally lead to significantly lower interest expenses going forward. And with that, I'd like to hand the word back to Per Haakon.

Thank you so much, Line. I'm really proud on behalf of the entire Spir team to see positive development across all key parameters. Let's now shift gears and talk about the future. As a pure-play real estate data and software company, we have a clear growth agenda, and you should also expect us to deliver improved profitability. We strongly believe that the combination of long-term demand from the real estate and property sector, significant digitalization needs and ambitious product development pipeline and personalized and active sales efforts are the building blocks for growth. Long term, we target an organic growth rate of between 6% and 9%. Improved profit is equally important. We are committed to tight cost control, and we see potential for further simplification in operations, which could unlock additional cost savings. Over time, we expect a normalized growth of OpEx of 5% to 8%. For 2026, we are rolling out a cost reduction program of at least NOK 20 million. This comes on top of the NOK 10 million we implemented earlier this year. Cash EBITDA will remain our key measure for underlying profit, and we are targeting a cash EBITDA margin of 12% to 15%. This can be compared with the 7.5% we delivered in Q3 on a rolling 12-month basis. Finally, we are committed to a disciplined capital allocation strategy with a robust financial platform and 40% to 60% of cash EBITDA to be distributed to shareholders through dividends or buybacks. In addition, we see the potential for M&A activities in a disciplined manner. Expanding on the M&A framework, we have more than 5 targets in various stages. We are looking for companies that deliver real estate software, data and/or geoinformation services to our core customer segments in the Nordics. We also need to see product synergies, complementary software solution, increasing revenues per property transaction or increasing subscription revenues either. And as mentioned, acquisitions should be accretive to own valuation. We will finance acquisitions by debt, shares or earnouts. With that, Line and I would like to wrap up this presentation of this strong third quarter for Spir Group. Thank you to the whole team who worked so hard to deliver this strong quarter, and thank you to all of you who follow us. And always, we are just an e-mail or a phone call away if anyone has questions. Have a great day.