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192. Bull, Bear & Beyond – Zalaris: executive interview
2 Plays3 days ago
In this interview, Zalaris founder and CEO Hans-Petter Mellerud introduces the company and provides the highlights of the company’s recent FY25 results. He discusses the company’s geographic expansion plans and provides an update on progress in Asia Pacific. He explains that he sees AI as a structural margin and competitiveness enhancer, reducing manual work, shortening implementation timelines and improving quality. While AI can improve automation, it does not eliminate the need for compliance oversight and domain expertise. Zalaris’ shared services model means it can scale its AI investments across the entire customer base, strengthening its competitive position. Finally, Hans-Petter outlines the medium-term targets for the company and explains how it expects to achieve them.
Zalaris is an Oslo-listed leading provider of comprehensive payroll and HR solutions and services that cover the entire employee lifecycle. The company operates in 18 countries across the Nordics, DACH region, the UK and Ireland and Asia-Pacific, serving over 1.5 million employees every month across all its HR solutions.
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About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
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Transcript
Introduction of Edison TV and Solaris
00:00:07
Speaker
Welcome to Edison TV. I'm Catherine Thompson, technology analyst at Edison, and I'm here today with Hans-Petter Mellerud, CEO of Solaris. Solaris is a Norwegian headquartered and listed provider of HR and payroll solutions operating across 18 countries in Europe and Asia-Pacific.
00:00:28
Speaker
Welcome, Hans-Petter. Thank you so much, Catherine.
Overview of Solaris: Services and Platform
00:00:33
Speaker
um ah Just to kick off, um do you think you could remind our viewers um with a brief overview of Solaris?
00:00:39
Speaker
Yeah, I think you touched on it. Solaris is a European provider of global payroll and HR outsourcing and consulting services. We deliver services on our cloud-based people platform, which is powered by SAP SuccessFactors and S4 HANA, and with the combined with business process outsourcing or BPO delivery.
00:01:04
Speaker
Today, approximately 80% of our revenue comes from recurring managed services, serving more than 400,000 employees across Europe and globally.
00:01:14
Speaker
Our largest customer has about, the in terms of geography, 48 countries covered with about 16,000 employees. Our model is built on compliance expertise, scalable delivery and multi-country payroll capability, positioning us as a trusted partner for complex payroll and ah HR environments. And our consulting unit is focusing on helping customers implement SAP human capital management and payroll solutions across the globe.
00:01:49
Speaker
Thanks.
Financial Results of 2025
00:01:50
Speaker
You've just reported your 2025 results. um Do you think you could talk us through the highlights? yeah it Yeah, 2025 was another year of profitable growth.
00:02:00
Speaker
ah Revenue reached ah that slightly above 1.5 billion Norwegian kroner, up 12% organically. ah Adjusted EBIT increased to 194 million, with a margin of 12.9% for the year.
00:02:18
Speaker
And managed services delivered 15% growth, with the or recurring revenue growth, and a strong 22% margin in q four Operating cash flow was ah good at 162 million or 162.5 million for the year and also really good in the quarter.
00:02:41
Speaker
And our board proposes a two and a half Norwegian kroner dividend to be paid out in after our general assembly.
00:02:51
Speaker
So if we're in the quarter, we strengthen our recurring revenue base. We improve margins and generate solid cash flow while continuing to invest in AI and platform scalability.
Expansion Plans and Market Strategy
00:03:05
Speaker
ah You recently opened an office in the Netherlands to serve the Benelux region. Could you talk me through your geographic expansion plans and give us an update on the performance of the Asia-Pac business, which I think was set up in the last few years?
00:03:18
Speaker
Our strategy is disciplined expansion in markets where we can leverage existing platform and our expertise and share services at scale. And as we communicate to the market, we're really strong in the Northern Europe and APAC, but we're a focusing now on covering G20 countries and basically all the all so Western European countries with own delivery capability to further increase ah win rates of multi-country payroll deals. So in Asia-Pacific in 25 and in the in the
00:03:57
Speaker
q four We had some operational adjustments. Performance was below our expectations in consulting, and we have taken corrective actions, including capacity alignment and tighter margin discipline. And we expect a gradual normalization now during Q1.
00:04:15
Speaker
And the having said that, we started APAC based out of Australia for a couple of years ago and have seen ah truly a fabulous growth there. But as said, the we had some overruns or substantial overruns on the project now in Q4. That's more of a one-off nature, and we expect to be back on track in Q1.
00:04:42
Speaker
Our focus ah on in terms of further geographic expansion it is, a as mentioned, we' focusing on the G20 and Western European countries with the and focusing on a strong execution rather than an aggressive geographic risk-taking.
AI's Role in Solaris: Enhancing Margins and Productivity
00:05:03
Speaker
Great. And perceived potential for AI to reduce demand and possibly pricing for SaaS software has recently hit the share price of many software companies. you know Considering that you provide but a combination of software and services, how do you expect AI to affect your business?
00:05:21
Speaker
yeah That's a question that I'm being asked a lot now from investors. and We see AI as a structural margin and competitiveness enhancer, not a threat to our model.
00:05:33
Speaker
Payroll and HR outsourcing are highly regulated and complex, and while AI improves automation, it does not eliminate the need for compliance oversight and domain expertise.
00:05:45
Speaker
it Instead, it enhances productivity, reduces manual work, and shortens implementation timelines and improves quality. We have a number of projects in place and are truly enthusiastic. Frankly, I've never seen as much enthusiasm ever in our organization in terms of implementing new solutions based on AI, and we have some truly enthusiastic fabulous use cases where we, for example, have rolled out new applications to customers in a number of weeks that otherwise would take give months and been able to analyze complex data in days that also otherwise has taken us weeks to do. so
00:06:33
Speaker
For us, we see AI as an enabler to further digitization and the to the the real power ah to further do the productivity improvements that we are targeting for this year and the years to come.
00:06:52
Speaker
And we also believe that our shared services this model allows us to scale our AI investments across our entire customer base. And this strengthens our competitive position and supports our long-term margin expansions.
Long-Term Goals: Sustainability and AI-Driven Growth
00:07:08
Speaker
Could you remind us of your long-term financial targets and how you expect to achieve them in both your managed services and consulting businesses? Yeah, so our ambition is to sustainably deliver 13% to 15% EBIT margins with the continued organic growth driven primarily by managed services.
00:07:28
Speaker
Managed services target growth is so we have set that the to 15%, whilst consulting is quite some lower at 5%. And with that, managed services is our structural growth engine supported by strong retention and upsell potential.
00:07:44
Speaker
Consulting remains strategically important as a land and expand channel, but we are focused on improving its profitability and somewhat volatile profile. Having said that, more than also 55% of the revenue in consulting is also either recurring or reoccurring type of nature with annual renewals of application maintenance services.
00:08:10
Speaker
and Over the next three years, we target approximately 10% annual productivity improvement driven by digitization and AI. Combined with operating leverage in the recurring revenue, this supports our margin expansion. And we believe that the achieving then a 10% annual productivity improvement should also potentially take us well above the 13% to 15% target margin.
00:08:38
Speaker
e So in summary, we are growing recurring revenue, we improve productivity, and we, through AI, we will continue also scaling profitably profitably over the next years.
00:08:55
Speaker
Sounds great. Thanks, Hans-Petter. Thank you as well, Catherine.