Tecnotree Oyj

accelerate our ambition 2025 the execution of our ambition 2025 strategy and also to deliver a second to none customer experience the desired user experience faster time to market actually the time to market has dropped drastically when it comes to the loyalty feature, when it comes to the DCLM, when it comes to call center functionality. We have retired more than 40 percent of the legacy product offering. During the migration, we did not migrate line to line. We have done a lot of product rationalization for GSM, non-GSM, and fixed line as well so we have reduced the number of product by 40 50 and also we have we have reduced the customer onboarding time mainly for the post paid in corporate customer and also we have increased the loyalty adoption we have one of the biggest loyalty platform right now in uganda

Hello, good morning for all. And I hope you enjoyed this short introductionary video. And thank you for all joining to this TechnoTree Q3 2023 results publishing session. My name is Timo Holopainen and I act as a moderator during this session. For the start, a few practical details related to this webcasting. This session will be recorded and recording will be made available in our website for those persons who are not capable to join today. And I hope that this recording is okay for you all. The session has the following parts, and the duration of this webcasting session is 45 minutes, and we hope we can reserve last 15 minutes for the questions and answers. First, our CEO, Padma Ravichander, will present the key operational highlights, and then our CFO, Indires Vivekananda, will present the numbers in more detailed level. After this, we have this question and answer session. And please note that you can write down the questions on your screens on the box and all the time during the session. And I hope that we will have plenty of questions and we target to answer as many as possible during the questions and answer session. So with this short introduction, I once more welcome you all, and I will now hand over the presentation and speech to our CEO, Padma Ravichander. So please, Padma.

Well, welcome to Q3 Financial Results of Technotree. I'm happy that you're able to join us today. Thank you, Timo, for the introduction. I want to definitely tell you that we have had a record quarter in terms of order intake and a good amount of deliveries have happened to our customers this quarter, enabling us to have a stable growth going forward. We recorded 31 million euros in orders and a 34% growth year on year in terms of order backlog, totaling to about 78 million in order blocks. Much of the new orders have come from Middle East, Africa, and Europe this time. I will talk a little bit about the quality of the orders shortly. We also grew 7% in our revenue. to 21.4 million. A lot of the revenue has definitely come from annual recurring revenue and some new licenses we have been able to place with our customers. We have had an healthy operating result of 23% growth despite tough situations in the market. in terms of geopolitical situation and the inflationary pressures that we are seeing in various economies. We continue to post a very healthy operating result of 6.2 million and our EBIT margin was 29% this quarter. We did have a constraint in terms of cash collection. A large amount of that is mainly due to hyperinflationary pressures in some of the regions that we operate, but also in terms of foreign exchange and the ability to convert cash in some of the geographies. We are continuing to work on this particular aspect of our business. And later on in my presentation, I will talk to you about a strategy where we are trying to strengthen and bring in more stability in terms of our revenue monetization, as well as in terms of our cash collection process. So just wait till I get to that side of the presentation. In terms of shareholder equity, we have done exceedingly well. Year on year, 9% growth, and today it stands at 81.6 million. in terms of share owner equity. I also want to highlight a number of new wins that we have had. One of the biggest wins we have had is Telenor Denmark and Sweden. It is based on the work that we have done with Telenor Finland. We are consolidating and improving the quality of value added services for Norway, Denmark and Sweden. based on the existing relationship that we have with Telenor in Finland. So that's certainly a good door opener and a healthy rebound of an existing customer. We have several other wins. All of these wins that you're seeing here, both in Asia-Pac, Middle East and Africa, are all for large telecom operators. who want to move to a digital platform and operators wanting to migrate from being a telco to a techco requires them to improve their stack and standardize their ability to offer new services and new technologies on their platform. And Technotree certainly has had a good share of that new business coming in. The other important highlight I want to bring to your attention is our investment in cognitive scale acquisition definitely brought in 114 patents for us. And we are now monetizing those patents. We have been recognized by Market and Markets, which is a very leading analyst firm in North America. We are ranked number four for autonomous AI ML capability, just behind Google, Microsoft, and Amazon, and Meta. So basically, just above OpenAI. and in NVIDIA. So it tells you that we are definitely being considered among the leaders in the North American market for both autonomous AI ML capability, as well as embedded sense of fabric on our platform. We also won the diamond badge from This quarter, we won the diamond badge for API certification. We are number one in the world in terms of TMF, TM Forum API standardization, and we are also recognized for customer experience in the Excellence Awards by TM Forum. We have also a number of other recognitions, top two in the world in terms of revenue monetization capability. This is by a Canadian analyst for our billing and charging products on our platform. and also diversity and inclusion recognitions globally. So it's been actually a very, very busy quarter for TechnoTree in Q3. I spoke earlier about last, I think the last quarter, we talked about strategic investment focus areas. And today I wanted to give just an update on how these three areas of focus, business expansion, corporate and financial focus, and investment in new product and technologies has continuously bared good results for us. And I will give you a report card just in my next slide on how focus on these three areas has definitely improved our ability to attract new customers, win new orders and increase our revenue. While I give you the report card, I also wanted to tell you that we will continue to strengthen these three key areas of investment going forward. Definitely focus on more strategic acquisitions, lead our presence in North America, particularly in the United States and Canada, and strengthen our existing presence in Europe. We will also have a very focused expansion target in APAC. We are building a good pipe of opportunities there, and there is an opportunity for expanding our footprint in APAC and in Europe. In terms of corporate financial focus, we will definitely consolidate our investments in the cognitive scale, the AIML and the sense of fabric integration. We currently are focused in applying the AI ML capability, not only for our telco stack, but also on our FinTech stack to bring credit rating capability, goal optimization capability, and also for healthcare in our moments platform. We will continue to focus on using AI ML internally within the company to transform our own business model. I'll speak a little bit to that as well as we go forward in this presentation. Finally, we continue to invest in embedded AI on our telco stack. A lot of our existing customers and new customers really see this as a differentiating value proposition from us and are very keen to work with us to better their own customer insights, experience, and goal optimization and lead generation capabilities. We will also continue to invest across Cloud, IoT, and OSS capability to strengthen our platform and deliver a techno tree marketplace to our customers. In terms of what we have achieved in Q3 in these key focus areas, if you look at the acquisition of cognitive scale, this acquisition alone and embedding the sensor AI ML fabric into our platform very quickly and rapidly has yielded us several new customers with new opportunities in the area of healthcare. One of the African clients in terms of an MNO opportunity, We've had fintech opportunities coming our way. We have new tier one telcos in Canada, Brazil, South Africa, Denmark, Sweden, and Norway, all being brought to the table because of some of the AI ML KPIs and KRAs we are able to demonstrate today. to help their lead generation and help their business monetization capabilities for their own businesses. Then if you look at our investments in AI, ML, cloud, the BSS vast consolidation areas, our investments in R&D for healthcare, FinTech and OTT, you can see that many of the customers now, the telco operators want these services and capabilities in these adjacent markets and see this as a differentiated offering and potential that Technotree is able to bring on the platform so that they can easily integrate their enterprise offering to their customers with these technologies. Certainly, all in all, These investments are starting to bear fruit and also diversifying our customer portfolio. AI ML alone, I want to stress, is not only bringing new customers to the door because of the excitement around the sense of fabric, but it's also helping us deepen the relationship with our existing customers, who want to add this on top of the existing platforms to increase their own business acceleration and productivity gains within their companies. In terms of the delivery footprint that we were able to achieve in Q3, more than 50% of the orders that we have backed in Q3 have annual recurring revenue, which is more predictable. In other words, customers are paying upfront and then they are also paying either a monthly revenue or a quarterly revenue fee for us to continuously improve the stack operationally and from a business perspective. We celebrated 11 deliveries in Q3. It's quite an impressive track record for Technotree. I've been here myself 13th year this year, and I have to tell you, we've never had this many parallel deliveries happening simultaneously. That is mainly because we've had a product-led thinking to our platform, and we have automated more than 250 use cases on the platform. But most importantly, more than 70 percent of the 250 use cases are all configurable. Very quickly, they can be deployed into any market, configured very specifically for client requirements, using our low-code, no-code capability on the stack. And thereby, our ability to go live is a lot sooner and a lot faster. And they are able to experience the digital capability of the stack very quickly. Today, as we stand, we have 352 product features that have been added in Q3 alone on our digital stack. When you look at the quality of the backlog, I would say roughly the whole backlog is about 78 million. And in that, if you add the 9.9 million and the 32.4 million, more than 60% of the backlog is annual recurring revenue. Some of it is new revenue, some of it is existing orders that we have to retire. And then we have some new orders and then there is existing delivery backlog that is sitting in the pipe. If you also look at this global map, you can see that our delivery is now expanding in the geographies that we work and our annual recurring revenue across these geographies are also expanding. Now, what does this all mean to our customers? You saw in the video today, one of our very important key customers talk about business impact the TechnoTree platform has played in their markets and for their customers. Definitely the product-led approach is optimizing a lot of time to market for them. They are able to get to their customers lot faster with lot more newer and competitive services. New product updates, which used to take weeks for them to perform, are delivered in five minutes on the stack. The overall cost of owning the digital stack has been reduced because a lot of the technology that we use are open source and they're not license prone. Then the billing process, when customers have hundreds of millions of subscribers, to complete a bill cycle would used to take days are now done in a matter of hours, five to six hours. The bills are out to their customers and they can start collecting the revenue. So in terms of technical benefits, of course, it's open source, which means the TCO comes down. We are the number one company with 59 standard APIs, which means integrating our stack to other applications in the customer site becomes very easy and standardized. All our operators operate on a single code base, which means we can maintain the code and our R&D costs are more efficient. We have reduced the integration time by 66% on the stack. And we have several new modern features for zero touch deployment. This was one of the key features we exhibited during COVID. We didn't have our people traveling, but we still continued our delivery. And we are continuing to improve these types of capabilities in terms of self-healing, zero-touch deployment, AI ML-assisted dashboards in which very high amounts of recommendations are made to the customers before a problem arises, how that particular problem could be solved or how a customer request can be addressed by the stack even before the customer is about to make the request to the operator. Many good business benefits have also been added into the stack. What has this all done to us? It certainly created a different mix of customer profile for the company. It was not long ago, maybe five years ago, when the two leading customers, Claro and MTN, represented more than 80% of all the revenue that the company earned. And definitely for both investors and customers, our customers who come first, This was definitely a risk in terms of dealing with technology. Today, I'm happy to say we have diversified the portfolio and we have more than 28 customers on our stack. And what I call the legacy customers, which is our really old customers who have been with us a long time, continue to buy from us, continue to use our platform, are less than 50%. in terms of revenue that they bring in compared to the new customers that are using the techno tree stack. The other important observation on the second part of this bar chart that you can see is that our annual recurring revenue on the stack is definitely increasing significantly compared to license and traditional project delivery models. So this is definitely a good trend in terms of a healthy outlook and growth for techno tree. Finally, I talked about the business model transformation. It is quite evident when you look at our results that the one concern that we have, and it's an economic and global concern, and we are not isolated in terms of the geopolitical situations that are emerging, particularly in the Middle East and in Europe, and continue to cause concern for all corporations. in terms of cash and availability of cash, foreign exchange, inflationary pressures, etc. But we are relentless in terms of how we can before I go there, telecommunication is an essential service. Whether there is war or there is peace, everybody needs to communicate, everybody needs to interact and be more digital than we have ever been before in terms of how we engage with each other. So clearly it's an essential service and the opportunities for us to improve the quality of that service is definitely there in terms of growth potential and it's one of the industry industries that is growing quite rapidly in terms of the industry growth of about 14 average aca gr even in these tough times but however if you look at some of the challenges we have faced with our business model is that our business model the way we used to do deliveries within from technotree for large clients would take 20 24 months for small clients would take anywhere between eight to 12 months. And during that process, the cash collection takes a very long time. You know, you get drip feed of small amounts of collection and then you have, you know, long gestation period before the product goes live and then the customer is able to start paying us. We, with the high level of productization, I talked about 250 journeys out of which 70% is fully automated and configurable with low code, no code. I talked about quarter on quarter, we are increasing the number of features. This quarter alone, we have 300 plus new features we have added to the stack. All of these things have made the stack highly productized, highly automated in terms of how we can deploy it and stabilize it at the customer environment. Now we are changing our business model in a way where instead of going through the traditional process of understanding the customer requirement, modifying the code to meet the requirement, doing the integrations, testing it and delivering it over 12 to 24 months, we launch our stack. into our customer either as a cloud service or as an on-prem service within six months and we go live we collect cash immediately and recognize revenue then we have a new business model which is a very agile business model it's called devops where we provide a customer success team that works closely with the customer and their businesses to continuously inject new types of services that the customer has to take to market. And therefore, that team will continue to work in the customer environment in this automated low-code, no-code environment to offer new services that they can take to market and monetize. So their own ability to become digital becomes faster. Their ability to offer new services on the stack becomes more predictable for them because every two months they can deliver new features and our ability to monetize. In other words, collect cash when we go live and start on a monthly recurring revenue capability for the DevOps service, the customer success service. that we offer also stabilizes. And the other important thing is today, because of this long gestation process of 12 to 24 months to deliver a project, we are not able to take on multiple projects. With the highly productized product, we are now able to have several more parallel projects. I talked about 11 deliveries this quarter. We are aggressively looking at growing that capability of number of deliveries going live in a year more predictable and more faster. And technology today is at a place where this can happen. And therefore our revenue growth should improve the quality of the revenue should improve and because of this productization do once deliver many times the cost of building and serving a customer reduces which means our profitability should improve but most importantly very quickly after six months we get into a monthly recurring revenue plan which means that should help us be more predictable in the way we collect cash. And it's also easier on our customer because they wouldn't have a large capital outlay and different types of capital outlay coming out. They will have a a significantly smaller capital outlay they will make upfront and the rest of it would be monthly OPEX that they would have to pay to us. So the capital investment reduces and it becomes more an operative expense which is more manageable on a monthly basis for the customer. So this is the concept of a monthly recurring revenue model. It is good for the customer because it accelerates their automation and their ability to become digital and monetize on the stack and build their revenue. It certainly stabilizes Technotree's ability to deliver more customers at the same time and increase our revenue, but more importantly, also make our cash collection more predictable and standardized. We're also using a lot of our own AI ML sense of fabric to achieve some of this transformation. I hope in the coming months and years and quarters, we can talk more about this model of working. internal transformation we are going through. And I wanted to just give you a sneak preview of what we are trying to do in terms of stabilizing the business. I will stop here. I will welcome Indresh to continue to give you the financial outlook. And then we can take on some questions. I'll come back and summarize and we can take on some questions. Thank you, Indresh.