Redeye expects a stable Q4 report from Addnode, sharing a lot of similarities with Q3. We see some encouraging signs in DM and PM, while the softer Automotive market will likely hurt the license-heavy Q4 in PLM. We leave our Base Case of SEK112 unchanged.

We expect a stable Q4 from Design Management, with the gross profit in focus considering the new transaction model likely to have a full effect on the USA and a partial effect in Europe (meaning unchanged gross profit, lower sales and higher margins, all else equal). The US ABI (National Architecture Billings Index) reached above 50 (indicating expansion) for the first time since July 2023 in October at 50.3. Although it declined somewhat to 49.6 in November, it still constitutes a notable improvement over the 42-48 levels seen since late 2023. Particularly, the West US index showed a strong trend in October and November, partly driven by demand for data centres. Overall, this is a slightly positive signal regarding Addnode’s AEC offering in the US.

Lagercrantz Group

Fortnox

Systemair

PowerCell Sweden

Invisio

Enea

Hexatronic Group

Addnode Group

* Concentration risk in revenue sources, with over 20% of sales related to Autodesk and Dassault Systémes platforms.
* Uncertain positioning to capture the greatest market value, given the mix of VAR and SaaS offerings.
* Potential limitations in pricing power, particularly within the public sector.
* Lack of certainty regarding the longevity of competitive advantages beyond the near term.

* Strong recurring revenue base (70%) and meaningful reinvestment opportunities, enabling scalable growth without expensive reinvestment.
* Benefiting from secular tailwinds in digitalization across multiple sectors, with a track record of successful geographic expansion.
* Demonstrated competitive advantages through switching costs and consistent value creation, with no signs of weakening position.
* Limited regulatory interference and cyclical dependencies, with high operational stability and independence from commodity prices.
* Positive sustainability impact through products that contribute to efficiency and environmental improvements, coupled with high employee satisfaction.

* Operating margin below 20% and not consistently increasing, potentially indicating challenges in cost management or competitive pressures.
* Return on Equity (ROE) below the 20% threshold for the past five years, suggesting room for improvement in capital efficiency.
* Earnings growth has not consistently exceeded 10% annually over the past five years, indicating potential limitations in profitability expansion.

* Strong gross profit margin and consistent revenue growth above industry average, indicating pricing power and market share gains.
* Solid financial health with favorable current ratio, manageable debt levels, and strong interest coverage, suggesting stability and capacity for growth.
* Impressive cash flow conversion rates, indicating high-quality earnings and ability to generate real cash profits.
* Attractive dividend yield with recent growth and good cash flow coverage, showing commitment to shareholder returns.

* Limited insider ownership, with management and board members collectively owning less than 10% of shares, potentially reducing alignment with shareholder interests.
* Absence of a controlling owner with long-term commitment, which could impact strategic decision-making and long-term stability.
* Lack of substantial personal stakes by most board members, with only one member holding a significant share (about 5%), potentially reducing their commitment to shareholder interests.

* Strong leadership with CEO Johan Andersson's 18-year tenure, deep industry knowledge, and proven track record of value creation, fostering a culture of innovation and long-term commitment.
* Decentralized organization promoting accountability, with consistent delivery on promises and a clear strategic plan focused on consolidating partnerships and expanding product portfolios.
* Effective capital allocation, demonstrated by successful M&A activities, attractive returns on investments, and a consistent dividend policy, supported by opportunistic use of company stock.
* Transparent and timely investor communication, with management being candid about mistakes and maintaining consistent storytelling and key metrics over time.
* Board diversity and expertise aligning with business strategy, including industry veterans and leaders with relevant experience in software and Addnode's end markets.

SEKm	2023	2024e	2025e	2026e	2027e
Total Revenue	7,412.0	8,103.4	6,540.6	7,397.7	8,332.1
Revenue Growth	19.1%	9.3%	-19.3%	13.1%	12.6%
EBIT	410.0	588.2	711.5	842.1	946.6
EBIT Margin	5.5%	7.3%	10.9%	11.4%	11.4%
EV/Revenue	1.6	1.8	2.3	2.0	1.8
EV/EBIT	29.8	25.4	21.2	17.9	15.9
EBITDA - CAPEX	552	744	864	1001	1104
EBITDA - CAPEX Margin	7.4%	9.2%	13.2%	13.5%	13.2%
EV/EBITDA - CAPEX	22.1	20.1	17.4	15.0	13.6
Net Debt	837	1294	1399	1387	1389
NWC/R12mSales	-7.3%	-7.0%	-7.0%	-7.0%	-7.0%

Key financials

DM: Promising Signs in US AEC