This article first appeared on GuruFocus .
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Pro Forma Sales:SEK 3.7 billion, with 85% recurring revenue.
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Sales Growth:15% total growth, with 4% organic growth.
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Subscription Revenue Growth:11% increase in subscriptions.
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Transactional Software Revenue Growth:20% increase.
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Cash EBIT Growth:18% growth, with margin increasing from 24% to 25%.
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Organic Subscription Revenue Growth:4.4% increase.
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Transactional Revenue Growth:21% increase.
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EBITDA Growth:24% growth over a 10-year period.
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Release Date: July 14, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Vitec Software Group AB ( STU:7VS ) reported a 15% total sales growth, with 4% organic growth and 11% growth in subscription revenues.
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The company has a strong recurring revenue model, with 85% of its SEK3.7 billion pro forma sales being recurring.
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Vitec Software Group AB ( STU:7VS ) has a diversified customer base, with the largest customer accounting for only 8% of total sales, reducing dependency risk.
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The company is actively leveraging AI to enhance its product offerings and internal efficiencies, which is expected to drive future growth.
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Vitec Software Group AB ( STU:7VS ) maintains a disciplined approach to M&A, focusing on acquiring established, profitable vertical software companies with proprietary software and recurring revenue models.
Negative Points
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No acquisitions were concluded during Q2, indicating potential challenges in the M&A environment.
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The company is experiencing a lag in translating increased market activity into actual revenue growth.
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There is a noted decrease in the tailwind from price increases, which may impact future organic growth rates.
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The tax rate has increased to 26%, higher than previous quarters, due to profits being earned in countries with higher tax rates.
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Despite increased interest in AI, customer adoption remains cautious, with many preferring incremental changes rather than wholesale adoption of new technologies.
Q & A Highlights
Q: Can you discuss the outlook commentary and areas where you see an improving business climate? A: We have observed increased demand in the healthcare, public, and real estate sectors. While we haven't seen this reflected in revenues yet, there is more engagement and order signing, indicating a positive trend. We expect this to translate into improved growth rates towards the end of the year.
Q: Could you elaborate on the growth in the transaction revenue space and the areas driving it? A: The growth is largely driven by existing customers, particularly in the real estate agent sector, with significant success in Norway. The transaction-based revenue has grown over 30% quarter-over-quarter in some areas. Inova's performance has been stable, contributing to the overall growth.
Q: How sustainable is the pro forma organic growth of around 7% in recurring revenue? A: The growth is expected to stabilize around 5-6% going forward. The pricing component will decrease slightly, but this level of growth is consistent with our historical performance.
Q: Are you seeing any new competitors emerging in your niche markets due to AI developments? A: We haven't observed customer churn specifically due to AI. While there are new entrants in sectors like bank finance and real estate, they are typically niche players. Our focus remains on enhancing our offerings with AI to meet customer demands.
Q: Do you have examples of AI features that customers are willing to pay for, and when might AI contribute to organic growth? A: AI is integral to our new developments, enhancing modules and functionalities. Customers are willing to pay for features that improve efficiency, such as identity functions. AI will naturally drive organic growth as it becomes embedded in our offerings.
Q: What is driving the increased M&A activity, and are sellers more willing to meet at lower multiples? A: We are seeing more volume, especially with larger targets. Some sellers, particularly those with institutional or private equity backing, are more active. We remain disciplined on valuation multiples and are not driving prices up.
Q: Are there regional differences in M&A activity, and are you looking outside current markets for targets? A: Our focus is on Europe, and we are exploring opportunities outside our current markets. While we are well-known in the Nordics, we are also looking at Continental Europe for potential acquisitions.
Q: Have you noticed any change in customer attitudes towards AI and new features? A: Customers are increasingly interested in AI, seeking to understand our product pipeline and how we can assist them. While they are cautious about major changes, there is more openness to pilot projects and incremental improvements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
