Talenom Oyj (TNOM) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to join Talenom's H1 release webcast. My name is Juho Ahosola, and I work as the CEO of the company. And with me here today, as usual, is our CFO, Matti Sakkinen.

Good morning, everyone, and welcome on my behalf.

Okay. Let's start then. Once again, welcome from my behalf as well. Here's the agenda for this review. So I will start with a short brief about Talenom if we have some new investors online. Then I will comment Q2 highlights as well as our development during the review period. And then Matti will comment after me our financial performance in a bit more detailed level as well as outlook and guidance. And at the end of this review, there's time for questions as well, which you can ask throughout the review with the chat feature. But let's roll out. So a short brief about Talenom, what do we do and what kind of companies is Talenom. So Talenom is a service company. First of all, we help entrepreneurs succeed with different kind of services, accounting services, payroll services and different kind of consulting services as well. And we operate in 3 operating countries: Finland, Sweden and Spain. And we combine our growth 2 elements, organic growth and then selective acquisitions. And our approach is to combine strong local expertise and ownership with our scalable ONE Talenom concept, which creates better business outcomes in different ways. And software-wise, we work with best-in-class solutions and software in all our operating countries. And this creates the way of sustainable growth for us, and we help our clients grow as well. But that's Talenom at class. When it comes to our services and revenue streams as well. So we have core services, accounting services, payroll services and account receivable services, and these are highly recurring and that's, of course, positive. But in addition to these core services, we have also different kind of value-added services such as HR services or legal services or, let's say, business intelligence services. And we see these value-added services important in basically a couple of ways. So first of all, they are important source of growth for us in the future as well. And then secondly, they are important in terms of customer retention. So that's why we are focusing on this in addition to, of course, this our core. And we have also industry-focused solutions for different selected industries. But that's our service portfolio. So revenue comes from services and the type of revenue is highly recurring. Then last point when it comes to this, so our markets where we operate. So we have 3 operating areas: Finland, Sweden and Spain, and we are not looking to expand into new areas or countries during near future. So basically, here is the reason when we are looking at markets, we have a lot of room for growth in all our operating countries, and we believe that we can grow remarkably in all these countries during upcoming years. And market-wise, the structure of accounting market is pretty similar in all countries, Finland, Sweden and Spain. So we can recognize this fragmentation and then also this consolidation trend in all countries. But the main point is that we operate in these 3 countries, and we see great growth opportunities in all our operating countries. That was a short summary about Talenom, and let's then move into the second graph. And here's some highlights, and then I will comment our strategic development as well. So starting from the summary. So this first -- this second quarter was the first full reporting period for the new Talenom after the split with Easor. And overall, I would like to say that it was positive in many ways, and we made good progress in multiple areas and in our main KPIs during the start of this year and Q2 as well. So many things are going and many KPIs in the right direction, and we are super happy on that. And I'm thankful for all our personnel of that hard work around this. During the review period, we continued the implementation of ONE Talenom concept, which is really central part of our strategy as we have communicated. And we also worked around this country-specific growth strategies a lot. And when it comes to software strategy, I would like to say that good progress around that. And we believe that this new software neutral approach for this new Talenom is opening significant growth potential for the future. So overall, I would like to say that positive quarter, I'm super thankful for our personnel, all the hard work around Q2. Here are our 3 main priority areas for this year 2026, and I will now open how it's going in terms of these 3 areas. So first of all, implementation of the new strategy in all countries as we have just started this new chapter of Talenom. Then improving profitability in Sweden and Spain, important as well and then implementing growth strategies in all operating countries. But let's start from the first one. So when it comes to strategy implementation during Q2, we continued systematic work with ONE Talenom concept in all our operating countries. And I would like to say that it's this implementation of new strategy is going as planned. During Q2, we measured ONE Talenom index, which describes for us the degree of implementation of the ONE Talenom concept. And as well, we measure customer experience, customer satisfaction. And these both metrics are developing into the right direction, which we are super happy about. And then when it comes to this new software strategy, extremely important part of our strategy, also growth-wise. So we made multiple collaboration agreements with several new system providers. And as said, we believe that in the long run, this will open up significant potential for us. And initial experiences around this new software strategy are positive in the organization. Then secondly, improving profitability in Sweden and Spain, starting from Sweden. So in Sweden, we can see a positive profitability trend. I would like to say that Swedish management has done really hard and amazing work around profitability. We are now definitely going in the right direction as well as in multiple other metrics such as customer experience, employee experience and ONE Talenom as well. And as we know, we have adjusted our cost base in Sweden remarkably during this year, and now we can see effect on our figures. And of course, we are here building the base for future profitability for upcoming years as well. Then when it comes to Spain, comparable EBITDA was weighed down by acquisition integration costs and then particularly this EUR 1.2 million impairment of trade receivables. And it's worth emphasizing that profitability was in line with comparison period if we exclude this onetime item, this impairment of trade receivables. And when it comes to these integration costs in Spain, we have a really -- I would like to say that solid plan in place to improve profitability and cut these integration costs in the future. But maybe this like profitability trend and our like development in Sweden is something that is very positive for us. Then thirdly, implementation of growth strategies in all operating countries. So we continued work around these growth strategies in all our operating countries. And we really believe and we have good indicators that this product software offering will open over time, really good and significant growth potential for us. Also, when it comes to growth, something we want to communicate and emphasize that the market conditions in Finland, they have been really, really challenging, and they weighed on our growth towards the end of the year. But in any case, we continue systematic work to support our long-term growth and our sales team in Finland has done really good work in these challenging market conditions, and we want to focus where we can and we can focus on our actions. And we believe that over time, market will support our growth as well. as well as this new software strategy. And when it comes to second part of our growth, so acquisitions. So we executed 2 acquisitions during review period in Spain for this second quarter. So that about strategy implementation and these 3 main areas for this year. Here is the summary of our financial figures. So comparable net sales, it grew a bit 2.8% EUR 30.6 million. And then EBITDA, it's important to emphasize that comparable EBITDA declined slightly due to this impairment of trade receivables in Spain and was EUR 5.8 million. And then operating profit, you can see from the right-hand side, but Matti will comment on open figures now next in a bit more detailed level. Thank you at this point.

Thanks, Juho. Okay. Let's jump to the financial key figures. And in my slides, I will focus on our continuing operations and comparable financial figures. Let's start from the group's comparable net sales and our growth was 2.8% in Q2 and net sales was EUR 30.6 million. This growth came from Finland and Spain. In Sweden, our growth was negative. Group's comparable EBITDA, it was EUR 5.8 million in Q2 and 18.9% of revenue. The profitability development in Finland and Sweden was positive and was impacting positively to our profitability. On the other hand, this nonrecurring environment in Spain was impacting negatively to our profitability. Group operating profit was EUR 2.3 million and 7.7% of net sales. This development is in line with our EBITDA development. Depreciations were approximately at the same level with the comparison period. And then let's jump to the country-specific key figures. In Finland, our growth was 1.4% and net sales was EUR 18.7 million in Q2. This growth was entirely organic. And we still see in Finland that this economical situation is challenging our growth actions. Related to these challenges, we see that customer churn is a little bit higher than normally. And also, we see markdowns to the lower level of activities in our customer companies. It's great to see these positive signs from the Finland's economic growth. And it's meaning that in our business, the impacts will be happened with the delay. So that's, of course, positive for the future. The profitability in Finland was strong. Comparable EBITDA in Q2 was EUR 5.7 million and 30.2% of net sales. The business performed very well. On the other hand, we have adjusted our resources and costs to meet this challenging growth environment. There were also some timing differences of expenses between the quarters, and that was also impacting positively to this development in EBIT. And now in Sweden, we see that our growth was negative, minus 9.9% and net sales was EUR 5.9 million. We had high customer churn in Sweden in 2025, and this is still impacting to our net sales development. On the other hand, we all the time see that this trend from the new customers and customer churn is going to the right trend, and we expect that it will also impact to our net sales development in the later phase. Comparable EBITDA in Sweden was EUR 0.7 million and 11.6% of net sales. We have continued these cost adjustments and profitability actions in Sweden, and we are very happy to see this positive trend in terms of profitability. Of course, we continue these actions, and we expect that we are on track to achieve positive EBITDA in Sweden during this year. Then we jump to Spain figures. The growth was 26.2% in Spain and net sales EUR 5.9 million. We have made 4 acquisitions in Spain after the Q2 2025, and most of the quarter's growth come via these acquisitions. We also continued steady performance with our new customer acquisition, and it's meaning that it's also supporting our growth during this year and in the future. Comparable EBITDA in Spain was minus EUR 0.6 million and minus 9.4% of net sales. We have integration costs and also increase in fixed and software-related costs, which are impacting negatively to our profitability development. In addition of that, this nonrecurring impairment of trade receivables is impacting significantly to our profitability development in Q2. And next, we jump to outlook and guidance. We expect that our net sales will be from EUR 110 million to EUR 120 million and comparable EBITDA from EUR 18 million to EUR 22 million. So our guidance is unchanged. And now we jump to the questions.

We have some questions online. So let's get started. Is there any of that Spanish EUR 1.2 million write-down still collected? Can it still be collected? Or is it all gone?

Yes. Of course, it's possible that there is some opportunities to collect them. But there is high risk for them, and that's the reason that we have made this write-down.

Yes. Yes. So what is included in the EUR 2.4 million software and digital investments now when we are a service company. So is those?

Yes. We are still continuing our investments related to our automation processes and also different like AI improvements, for example.

And it's also worth mentioning that during this review period, we finalized this like financial report for our client like AI-packed report. So that's one item there where we have invested in the future as well, we are going to develop digital solutions such as AI solutions to -- in line with our strategy.

Yes. So do we have any results seen now from bringing the Fortnox back? So is it bringing any results?

Well, I think we are now talking about Sweden here. So we don't have this kind of like projects bringing some software back or like or so we always want to find what is the best solution for our clients and sometimes it might be Easor or sometimes it might be Fortnox and sometimes it might be some other solutions. So we always start from a client perspective. That's our strategy. And it's true that Fortnox it's really good and important software for us in Sweden.

Yes. So when do you expect the international acquisitions to improve margins?

Well, if we start from Sweden, I think we have been quite clear with that. So we are now looking at this positive EBITDA and working hard around that target. And when it comes to Spain, I think there -- where we have done our recent acquisitions, there's a lot of different kind of integration costs and it's not only one thing. It includes software cost and broker cost and different kind of personnel costs from HR and other support functions. And of course, we have a plan in place how to reduce that cost over time. And in Spain as well, our target is that positive EBITDA for this year.