This article first appeared on GuruFocus .
Release Date: August 20, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Online legal growth of 7% in Q2, driven by AI uplifts across all geographies.
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Adjusted EBITDA margin improved to 25%, up 2 percentage points year-over-year.
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Strong financial performance in Denmark, Sweden, and Spain, where Karnov is market leader.
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Launch of new AI-driven workflow solution in June, with high customer satisfaction and early adoption.
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Leverage at 2.0 times, well below financial targets, with ongoing share buyback program.
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Region North online legal grew 11%, with adjusted EBITDA margin reaching 50%.
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Spanish business accelerating growth with 5% organic growth and margin improvement to 18%.
Negative Points
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Organic growth slowed to 2.4% due to weak non-core offline sales, especially in France.
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French business had negative organic growth of 4.5% due to weak legal training sales.
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Adjusted free cash flow was negative at minus 14 million SEK due to increased CapEx.
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Group functions expenses increased by about 10 million SEK, mostly non-recurring launch costs.
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French margin declined 2% in Q2, with expectations of continued weakness in Q3.
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No clear timeline for recovery in French training market, which may take several quarters.
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Token costs for AI services are monitored but not yet fully controlled, with potential for inflation.
Q & A Highlights
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Q: Can you provide details on the pricing of the new AI workflow solution, whether it is usage-based, and any initial customer response? A: CEO Pontus Bodelson explained that the response has been very positive, with over 100 customers involved in co-development across the four major markets. Regarding pricing, he outlined a "product triangle": the base legal information solution (LIS), the AI layer which adds at least a 30% uplift, and the new workflow solution which adds another 50% on top of the AI layer. CFO Magnus Hansen added that for now, the pricing is subscription-based, not usage-based, as they believe this is the best way to launch the product.
Q: What is the differentiation between Karnov's new workflow layer and those offered by other players in the industry? A: CEO Pontus Bodelson stated that Karnov's unique advantage is the seamless integration of its proprietary, expert-authored legal doctrine directly into the workflow tool. This eliminates the need for customers to copy and paste between different systems, providing a single, seamless system that combines both the workflow tool and trusted content.
Q: Could you provide more color on the slowdown in online legal growth in Region South, which went from 3% in Q1 to 2% in Q2? A: CFO Magnus Hansen noted that the changes in growth are very limited. He highlighted strong and stable momentum in Spain, while growth in France is slightly slower. The overall trend remains positive, with Spain being a key driver.
Q: Regarding France, another tough quarter was reported, and it seems Q3 will be similar. When should we expect a turnaround? A: CEO Pontus Bodelson explained that the turnaround is difficult to time precisely, as it depends on the weak market for legal training courses in France. While the offline training business is hard to control, the new AI solutions launched in late March are the best-selling products in both Spain and France. He hopes to see changes in the training business in a couple of quarters, but the AI-driven parts are showing growth and are within the company's control.
Q: What part of the product and service portfolio is considered core and indispensable? A: CFO Magnus Hansen clarified that the core business is what they now call "online legal," which includes the legal information solution (LIS), the AI layer on top of it, and the newly launched workflow solution.
Q: Can the positive margin trajectory continue to deliver year-over-year margin expansion in the coming quarters? A: CFO Magnus Hansen avoided giving a formal prognosis but indicated that with the positive momentum in Spain and overall online legal growth, operational leverage should continue to look good.
Q: Region North has reached extraordinary margin levels. Are these sustainable long-term, or can they go even higher? A: CFO Magnus Hansen acknowledged the impressive margin levels but emphasized the need to balance growth and margins. He stated that while they have found a plateau, they must also invest in future growth, making it a balancing act going forward.
Q: How important are offline businesses, and do they increase the value of the digital offering? A: CFO Magnus Hansen explained that the offline side, such as books, is important because it is a source of the proprietary content and doctrine used in AI solutions. However, he noted that while the publishing part is important for creating a good AI product, the distribution method (print) is not as critical.
Q: After launching the workflow tools, where will incremental product development spending focus, and is there any cost inflation from AI more generally? A: CFO Magnus Hansen addressed token costs, stating they monitor them carefully but prioritize traction and high usage over controlling the last decimals. He confirmed that CapEx remains within the 6% to 8% of net sales range. He asked for the first part of the question to be repeated, and when it was, he reiterated the CapEx guidance.
Q: What is the total addressable market for the new workflow solution, and what share of customers could use it? A: CEO Pontus Bodelson described the workflow solution as opening a door to a new and rapidly growing market. He outlined five phases of legal work (intake, planning, research, drafting, and output), noting that four of these are new to the industry. While it is difficult to quantify the total addressable market, it appears to be growing much faster than the traditional legal information market, and customers on all four major markets have already adopted the solution.
Q: Why is Karnov not going even harder internationally with the new workflow products like VC-backed companies do? Is this an option for the future? A: CEO Pontus Bodelson explained that the current strategy is to focus on markets where Karnov has proprietary doctrine and content, as this provides immediate value. However, he acknowledged that expanding to countries without local content is a possibility for the future, though it is not in current plans.
Q: Will the company report numbers specifically for the workflow part of the business going forward? A: CFO Magnus Hansen stated that they have decided not to report the workflow part separately. Instead, they will continue to report under the "online legal" umbrella, which includes the LIS product, AI layer, and workflow solution.
Q: What portion of group functions adjusted EBITDA was non-recurring? A: CFO Magnus Hansen noted that the increase in group functions costs was about 10 million SEK, and the majority of that increase is non-recurring, related to the launch of the workflow solution.
Q: Are you considering any divestments in Region South to enhance the group's performance? A: CEO Pontus Bodelson stated that the company is constantly evaluating its portfolio for improvements, including acquisitions and divestments. While there are no specific plans at the moment, he highlighted the successful turnaround in Spain and the ongoing efforts in France, where they hope the training market will recover in a couple of quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
