Tecnotree Oyj

Good morning. I welcome you to this post Q3 2024 results publishing Investor Connect event. My name is Timo Holopainen and I will be the moderator for this session. We will record this session and make it available on our website later today. But over here, I must offer an apologize as 6th of September Investor Connect recording is not available on our website yet. And unfortunately, there was a technical problem during the Investor Connect and the recording doesn't exist. So most probably we cannot ever put the video on our website. We apologize and we do our best to avoid this happening in the future. Today's speakers are our CEO Padma Ravichander and our CFO Indires Vibekananda. Can you share the slide, please? In this session, we go through the Q3 2024 business review and highlights, then Q3 2024 execution and financial guidance KPIs, and Q3 financial review and highlights. Then after this, we have this question and answer session. And please note that you can write your questions on the Zoom screen during the presentations. With this short introduction, I will hand over to Padma Ravichander. Padma, please go ahead.

Thank you, Timo. Good morning and good afternoon to everybody who's joined us today. Thank you for joining on our Q3 earnings call. We welcome you to Technotree to get the updates. I will first give you an update, both on financials and business, which will be followed by our guidances and how we'll achieve our guidances, after which we will have Indresh talk about the financials themselves in detail. Thank you. Next slide, please. So welcome to Technotree. We are a business support systems telecom services provider for software. We have a global footprint for those who are new to Technotree. We have been in existence for 46 plus years, only serving the telecom operator worldwide. We believe our software touches 1.2 billion people and we service more than 90 customers in 70 countries. We ourselves have a footprint in 30 locations across the globe. We are truly a global company out of Finland and today I'm proud to say we have a digital stack which is among the top 10 in the world for telecom operators fully integrated with cloud capabilities as well as AI, ML, artificial intelligence and machine learning capabilities on the stack. What is really interesting to see is not You know, five years ago, we didn't have more than a handful of customers. Today, with our investments that we have made heavily in 2019 to now in our R&D efforts expenses, we have a stack which services many tier one telcos as you can see in this canvas of operators we serve around the world in Middle East, Africa, Latin America, Europe, APAC, as well as recently in the United States of America. The footprint is growing, and there are many operators here, due to confidentiality, who are not included in this canvas. So I'm really proud to see how colorful this slide looks, and it's still growing in terms of the number of new logos we are adding to the portfolio. I'm going to delve into the top line metrics here. As you can see, there are a number of indicators. 2023 was a very difficult year for Technotree. We hit the headwinds in terms of currency fluctuations and devaluation of currency in Argentina, the devaluation of Naira in Nigeria, and they were very severe, almost 100% devaluation, and it continued till Q1 of 2024. So the company really took this seriously. We sharpened our pencils and we said we are going to look at the financial metrics that will bring us back to the black, that will create greater enterprise value to our investors. And the one single metric that we honed in upon as a management team was free cash flow. We were, of course, advised by industry analysts that focus on free cash flow, reducing the operating costs will be the most important turnaround story that Technotree can bring to bear. Technotree has been known for its agility. We came out of debt restructuring, probably the only company in Finland. And it almost we had to, with the headwinds we faced in 2023, We had to repeat the story again, and I'm proud to say the big important transformation is the free cash flow here in the slide, which shows that in Q2, with the cost-cutting measures we were able to bring down, increase the free cash flow by 800K that quarter, and we almost more than doubled it this quarter with 1.7 million dollars. of free cash flow. Cash is king and we will be heavily focused on this. I also want to tell you that in September 6th, we had an investor connect and it's unfortunate it was not recorded, but I will be covering many aspects of it in this call today. So for those who missed the call, you would get the information updated with Q3 data here. Now, when you look at this chart of metrics, not all boxes are green. Our goal is to get to focus on making all of these financial metrics green, but it is a journey. And the most important aspect here is the fact that The revenue growth in 2023 was muted. This is mainly because the telecom industry itself is going through a change in terms of growth. Markets have indicated a 0% to 2% growth, especially for BSS vendors. So we did face a challenge in revenue growth. Our revenue growth was also hurt a little bit because the Q1 order intake for techno tree in 2024 was low. So there is a periodicity in the way revenue gets accumulated. Once we take an order, it takes six to seven months to deliver the results and capture the revenue. So obviously, in Q2 and Q3, our revenue growth has been growing. Our order intake has been growing, sorry. And as you can see, in constant currency terms, we have actually, year to date, earned about 63.2 million, which means 11% growth year on year on revenue terms, okay? And this is very important because of the geographies we deal with, the calculation of constant currency. I will turn to Indresh and have him explain for the analysts who are on this call how constant currency is computed by us because we work in different geographies with different currency fluctuations. So, Indresh, can you please explain this so that that metric is well understood? Thank you, Padma.

Welcome everybody. Good morning. As you know, the technology mainly deals with about six currencies for its revenue, mainly the Euro, Naira, Pesos, Kuwaiti, Dinas, as well as the Euro. While the currency changes is a normal phenomenon globally, but technology has a unique feature that some of the changes affect us adversely. So when we look at the way our revenue comes into picture, if the currency's ratio, what it was prevailing at the end of last year, that is on 31st December 2023, had not that changed, my revenue would have been much, much higher in the current quarter or in the current year as well. As you can see, for the first nine months of this year, in a constant currency, I would have earned about 63 million instead of 54 million, what I'm showing. So I would have earned nearly 9 million more in constant currency, the revenue, if the currencies had not changed. However, it is not just I always lose. My costs are also in some of these countries. And when they depreciate against Euro, I do get certain benefit as well. So that is why if you look at in my EBIT, while my revenue has gone up on a constant currency by about 9 million, my EBIT has not gone up in the same 9 million. It has gone up by slightly a lower amount. That is basically because when the currencies depreciate against Euro, I gain up in cost, I lose in revenue. And since our currencies are in that position, we always want to share with our shareholders the fact that in real, what did we achieve, and also in constant currencies, what we achieved, which is a good metrics from a finance perspective for the shareholders to know.