Wiser Technology AD (WISR) Earnings Call Transcript & Summary

Good morning and welcome to Wiser Technologies Earnings Call for the second quarter of 2026. My name is Liubomir Yankov, Investor Relations Director at Wiser, and I will be your host today. Before we begin, please note that this call is being live streamed on Wiser's YouTube channel, and it's also being recorded. Joining us on the call today are Ivaylo Slavov, Wiser Chief Executive Officer; and Martin Dimitrov, Chief Financial Officer. On today's agenda, we will cover the market environment and strategic context, financial results, business progress and our 2026 outlook. The call will conclude with a Q&A session. So with that, let me hand it over to Ivaylo.

Okay. Maybe we can go one slide further. So to make a short summary about the environment we are living in, word for this is potentially uncertain. We have different type of crisis. We have geopolitical developments, which are not in favor for running huge growth in the businesses. This means that we do have quite uncertain, let's say, situation across us on the one hand side. On the other hand side, we have one significant positive development, which will help us as a technology company to move on further. And this is that our customers already their artificial intelligence strategies. In the last 2, 3 years, we had predominantly proof of concepts and proves how the artificial intelligence will influence and impact the businesses of many of our clients. And today, we have the situation that everybody is a client and many of those guys are starting to plan budgets for the implementation of AI-driven scenarios and solutions on their own. This is very good in our favor because we spent the last 15 months preparing ourselves at that time. And now we are in intensive talks with most of our clients and partners how to cover the needs and the upcoming needs of our clients and markets for this. Talking about this and talking about the future of our industry, and especially the software industry, we found in the last 3, 4 quarters quite different scenarios which was painted on the wall about how this industry will develop. But we know one thing for sure now, and this what we know now for sure is that we will have a huge productivity increase and much less dependence on the particular technologies in the future using artificial intelligence. This means that all of us has to think about how to move on. The good news is that nobody is expecting declining budgets. The question is that the budgets on the client side will be different, and we have to have our responses to that. I will come later when we are talking about outlook to this exact topic. This means also that we have different skills, new roles, new job descriptions and all this. But this is, I would say, is kind of a veteran in the industry. I would say we are seeing this for the fifth, sixth time in the last 30 years means that we know how to deal with the challenges and we are prepared for that. Maybe next slide. So good overview about what is AI doing to the business. I mean I will start a little bit before that. And I would say that out of all the studies from McKenzie, from [indiscernible], from Deloitte, from all the, let's say, renowned companies which are doing those studies, we do have a different significance in the impact of implementation of artificial intelligence on the EBITDA level of the companies, means the companies which are clearly disrupted by artificial intelligence and companies which are less disruptive, but some of the processes and some of the data management flows are being automated. We as a software company, we are quite disrupted by artificial intelligence means that in all kind of fixed place assignments that we took over the last quarters in terms of workforce and in terms of spend hours quite a huge productivity improvement from up to 50% in particular cases, but starting by 30%. This means between 30% and 50% will be the productivity improvement by using AI in developing software. And this is something that we have to face now. We have to start to be better consultants, which is showing to the clients how to deal with AI. We have to do better discoveries. We have to do better coding in order to show the prototypes how the solutions looks like. But what we developed following the prompt engineering principles and rules and everything we know about qualitative development and continuous improvement in software development, we created in the last quarter, and this is something that I'd like to announce it here. We created our software development AI-based life cycle and model and framework, which combines everything coming from AI models and pair this with our knowledge how to build qualitative software in terms of security, reliability, following regulations, using compliance requirements and so on and so forth. And we have already shipped the first 2, 3 platforms, which are following this framework, and we can say 30% to 50% productivity improvement. The uncertainty we have, and this is the uncertainty everybody have is, what will be the price for the infrastructure. By using AI, however, we took another bold move, and all our developers are using the highest possible framework. In that case, we decided for all the developers, but all our other frameworks are using Gemini, ChatGPT and all the other standards. And we started to create own platforms on top of it. One more thing what happened in the last quarter, which make us proud and we think that we have a future because of this, we were able to close a contract with SAP to build for them connectors to third-party systems following the B2B platform. The B2B platform of SAP is a platform which was earlier days called Net Weaver and this is the platform that they integrated the processes into the ERP system. And what they gave us to us is that we have to develop for them following our proposed AI factory-oriented integration framework to create to them and standardize connectors to the rest of the world, to Shopify, to Salesforce, to Microsoft, to whom name it. And this was a big achievement, which thanks to our colleagues from the team led by Dimitar Dimitrov, initiative and all the presales activities and all the competition because we won this deal against predominantly German companies. And we are very proud because it give us quite a bright view for the future. Besides that, maybe a last sentence before moving to the most interesting part numbers. Besides that, we can say that we have a 10x growth of the AI pipeline, means in the last 3 months, we had more than 100 visits to our customers. We spoke with many of them. And luckily, and we see -- and I can say luckily, many of them see us as a trusted partner who will help them to go to this journey. And we are in the budget forecast for many of them and working heavily on that in the years to come to make this bigger. Sveto, your turn.

Good morning, everyone. So I can only say that the numbers fully support what Ivaylo has shared as a business perspective. We have been able to basically continue and finalize the company transformation and consolidation without any slowdown in our top line, and this has been a very important achievement. Normally, companies do sacrifice some top line in the sake of profitability. And in our case, thanks to our great and very well coordinated and structured efforts in our sales team. And thanks to our diversified portfolio and both customer and our service portfolio, we have managed to maintain our revenues at a very high level. And the trend is pacing in the right direction despite the transformation towards more AI focused services and despite the transformation of the company that we have started and we have successfully completed this quarter. As you can see, this is something we show every time. We continue to be well diversified, both in terms of industry and in terms of geography. And this only solidifies how we see the future because this gives us a very important footprint in all the important markets where this AI transformation is basically top of mind of all of our current and future customers. With regard to what we have completed, basically, our restructuring efforts have come to a sustainable upward trending profitability. And we continue to see the same as in Q1, also in Q2, this coming in month-on-month and being there to stay and to further improve. And this has been the result of our focused efforts to structure the company for growth on one side to deliver value for investors, on the other to make sure that we can also finance the growth without the need to go to the market for every other million we want to put on the top line, which is very, very important. We want to make the company self-sustainable with regard to growth and how we finance it. The numbers for H1, we've basically shown already the revenue and the EBITDA. And here, I would rather take your questions at the end, if you have them. You can see that our cost structure has basically improved and that's where the profitability comes from. There is a slight shift year-on-year between the remuneration and the external services. That's just the mix of own staff and subcontractors that we use, but our general direction has been towards cost optimization on many levels. And one other thing is, let's say, better technology utilization, which is another sustainable optimization we have managed to achieve. That's why I'm saying that all these cost wins are not onetime. They are sustainable because they represent a structural change in how we deliver, and how we build and how we support our customers. No significant change in our balance sheet. So again, happy to take any questions you might have here, but nothing major that we would like to bring to your attention.

So thank you, Svet, for the presentation. Thank you for showing the numbers. I would summarize the integration phase of the companies which were predecessing to the platform is over. And now we have the stable base for further development. And I think the good news is, there is one Wiser now and all people are working for this company, which is the platform, which is the future. And now we can start thinking more intensively about the next phase of profitable growth, which is in front of us, which is very much related to AI and everything else. Talking about the future, I outlined one of the areas, integration, where we see a huge potential for the future. Talking about our verticals, we were able to further win projects in defense to win quite significant extensions in our space business. And this is -- I'm very proud because what we are doing there with the biggest players in the market worldwide is, we are creating future and we are making innovative work, which is very important, and also, this is something that will give us competitive advantage in front of everybody else by providing to the clients the next phase of platforms and so on and so forth. Talking about the AI opportunity as such, we expect that a significant portion of our business in 2027, and this will be how we will come in the AI segment and much more of those former T&M-based businesses will transform to AI-driven fixed price projects and value-oriented and value-based approaches. And this is something that we are starting intensively to plan on our next year budgets, how to deliver that, what type of roles, what type of teams we need in order to move to this journey. Furthermore, talking about international development. We are intensively thinking about potential new acquisitions, which will help us to strengthen our customer relations because I think the engineering power we created is quite strong now. And having a very targeted and very concrete activities towards the markets we active, means MENA means Western Europe means U.S. will help us to be able to showcase and to show this go-to-market we created in the last 6 months to more and more good customers, so to say. Another strategic vertical discussion and development is, we built our AI financial services framework. We built our AI insurance framework. We are really targeting in all in each vertical where we have our strengths to create approaches and go-to-market with a very much focus on this development. Talking about 2027 and maybe also until end of the year, I think we will stay in the process of consolidation. We're looking for targeted acquisitions. We are working on a couple of concrete cases. I cannot disclose any one of them because they are too early stage to be disclosed now. And we hope to provide you with some more information in the months to come. I will not move that much on it besides the fact that we have like 1,500% EBITDA improvement. This is the outcome of all our integration activities, transformation activities and also the performance we created. And when I'm talking about restructuring, maybe restructuring is not the right word. We are talking about process improvements. We're talking about excellence. We are talking about implementation of something like 19 to 20 AI use cases for ourselves. We have new ERP system, which is state-of-the-art in production. We are working on new project and operations tools, and we will have integrated enterprise architecture until end of the year, which will allow us to be very competitive, fast and concrete in all activities we do.

Thank you, Ivaylo and for the detailed overview. We'll now move on to our Q&A session. [Operator Instructions] And now, we have our first question from Dubrin Tomov. The 2025 EBITDA figure included a number of nonoperating costs that depressed the reported numbers. Could you clarify whether the improvement is driven by a reduction in nonoperating costs or by junior operation improvement? In the last webinar, you mentioned you would present a deeper breakdown of EBITDA improvement. Could you share that now, saying just restriction is not enough?

For sure, what we are showing, as I said, and this is very important. We will always have some one-time costs, but what is improving our result is a sustainable, as we said, a number -- and unfortunately -- or fortunately, it's a large number of activities that impact the P&L and the balance sheet throughout. So it's not 1 or 2 things that we can attribute this to. And if we start from the top line, we can say and it's a continuous effort and you start to see the results as it builds up. We continuously and carefully assess which are the right projects to take, right projects to continue and the wrong projects that we should stop working on. And that's, how to say -- and that's a conscious decision we started taking as a group. And as it builds up as an impact, you see it throughout the P&L. So that's one thing.

Maybe I cannot hear between 12 and 15 projects in the last quarter, which the profitability of those was not responding to our aims and targets in the future.

So this is one thing. The other thing is -- and that also impacts how we manage the business. When you carefully select your customers not only through their profitability like potential, but also from their credit worthiness that also saves you, let's say, future risks of writing of receivables. So that's another thing that doesn't hurt P&L, the P&L and the balance sheet when you do the job right and when you work with the proper customers and you secure the relationship in advance. Another thing that we've done, as we said, we've introduced AI internally as part of how we work, and it also brings productivities, which are sustainable with improvement in internal processes with regard to tracking the time, the allocation, how we select the right teams for every project and very carefully monitoring the utilization and the agility of our team. And when I say carefully, we do it on a personal level. We don't work with averages in that respect. So all of these things, they add up. We've implemented an ERP, ERP, which also undergoes AI automation, which also helps optimize our SG&A costs. And all these things, they translate into sustainable, improved unit economics, not as onetime positive EBITDA impacts.

We are waiting for more questions.

I have a couple of questions, and I will go one by one. The first is on the acquisition front. And based on the fact that since our last webinar in June, I think, you told us that it is highly probable that we will see acquisition in the next year. Is there something that has changed since then and especially on the front of how do you plan to finance potential acquisition?

Two comments on that. First, yes, it has changed. It has improved. So we have further talks. We are on the same case we discussed like 3 months ago, and we hope to come to a positive end, but still not disclosable yet due to the negotiation with the discussions we have with targets. And the second is we are discussing about 2 ways of financing the deal. The one is acquisition financing from the banks and the other one is issuing a bond, where in both cases, both scenarios, we are in advanced discussions with potential partners.

So it is that financing only on the table for the moment?

And Ivaylo, if you allow me, because I think it's important and it's a financial, let's say, side of it. The way we structure any deals and the way we decide our financing is done with a clear aim, and we are achieving this aim to not to allow to worsen our debt profile, let's put it like this. Just to give an example, if we -- if we want to acquire a company, we'll make sure that whatever financial instrument we use on a consolidated level post acquisition, the indebtedness of the new entity would look much better than the current position of Wiser. And this is very important. Whatever we decide as a vehicle to finance the deal would only improve our debt profile.

The second one is on the revenue side. And yesterday, Mr. Slavov, so on your interview in Boomberg TV, Bulgaria, you said that aerospace revenue is now bigger than the automotive one. Is that right?

I didn't say Mid is here in the call. Still not, but working on that. Maybe Dimitrov, I can give the word to you to say a couple of words here.

Yes. So on the automotive side, we are extremely aggressive these days to win more and more clients. So far, our main efforts were going to the -- basically to the OEMs. And we are expanding nowadays to go on Tier 1s and Tier 2. So we're executing on a persistent strategy to penetrate more layers of automotive suppliers, and we are doing that through a collaboration with the top companies, and that includes not just from the automotive sector traditional, but that includes also SAP. So we have a special play together with SAP on entering into the automotive sector. So that as we are a partner which understands both domains well. On the Space and Defense side, yes, I mean, we are pushing towards Bulgaria to get recognized as a place where there could be a way bigger space industry. At this point, it's just one company, which is typically associated with the space business when it comes to Bulgaria. And we're pushing heavily on our own together with the Bulgarian space cluster towards promoting the capabilities in the country and, I believe, is a very strong example of that. So we are -- yes, we're exceeding quite some our expectations when it comes to space business for the current year, and we're optimistic also for next year. These are downstream applications. So the observation matters related to critical infrastructure related to defense, related to collecting data and analyzing it further. So these are topics in the space. And on the defense side, like in the previous mentioned, so we won, as some of you might remember, we got 4 new defense projects that we are starting later just in a few months. They are extremely interesting when it comes to knowledge and extremely valuable when it comes to capabilities for our countries and for Europe. And we're expanding on that as well. I cannot disclose more at this point in time what are the projects that we're preparing for defense. But I hope in the next meetings, we will be able to share more, especially if we win some of them, which we are fly fighting. So that would be good news.

Just a short follow-up on the automotive side. As we know, your biggest clients in the automotive division are the German OEMs. And as a matter of fact, the situation with them was not really great in the last 2 years, let's say. Do you see any change in this direction?

No, I don't. At the moment, I don't see growth basically or that much change for the European OEMs. However, for us, this is different because the supply chains of those customers are disrupted and we try to take advantage of that. So this is our play because the typical partnerships are more challenged these days and we take that as an opportunity for us this what we are striving.

Okay. And the last one for me, I'm sorry for being pretty...

You don't have to be sorry, this is why we're here.

My last question is regarding the employees and based on the AI developments, especially in Wiser, are we seeing reduction of the workforce on the consolidated level? Or should we expect something like this?

It's one of the great question, first. And second, it is one of the hottest discussions we have in the last months. I mean, most probably outcome is that you do more with the same amount of people or a little more than now. This is -- this is maybe the easiest way to explain this. We like to grow. We like to grow double digits. We put the base for that. The baseline is here now. We are stable on revenues year-over-year without any acquisition and following the integration processes and everything what was explaining about systems and activities. Luckily, we found a number of new clients, and we have a number of new opportunities in the pipeline, which is very good for Wiser because this is the base for the future. And on the other hand, we see 30% productivity improvement through AI in building software. Topping this, having in mind that still the biggest portion of our revenues is TNM based and it is not very easy to be replaced with AI from one day to another, and this will remain for a while. We will say we can make a double-digit growth without growing significant by the number of employees. That's the most easier way to explain this. And when we are looking from a 3 to 5 years perspective, which we did in our Board and in our strategic discussions and meetings. We plan like this between 35% and 43% productivity improvement over the time concerning the workforce. If we grow 10% year-over-year in the next 3 years, then potentially we need just 5% or 10% more people. Did this answer the question?

Yes.

Thank you. Next question. Can you discuss the revenue dynamics by verticals and geography? Comparing the breakdown of revenue, it seems the only growing vertical at the moment is media at around 10% year-over-year, while financial services is 12% year-over-year lower. Could you provide some more details behind the dynamics here? When can we expect more visible growth in aerospace? In terms of geographies, Middle East is the sole growth driver at 24% year-over-year versus '23 decrease in North America. Do you expect a turnaround in North America in 2H or this is a structural weakening of demand in NA where AI is more heavily adopted and disruptive software? Also, as a note, please start providing these growth numbers in the presentation instead of just breakdown.

Because there was another 10 questions following one after each other, and it will be very tough for me to remember everything but let me put it somewhere and go as the question.