Tecnotree Oyj

and with me today presenting our CEO Padma Ravichandar and CFO Indresh Vivekananda. We will be having the webcast here on Zoom and we are opening the questions down below, which will be presented at the end of the call in the Q&A sections. Without further ado, CEO Padma Ravichandar, please go ahead.

Good morning and welcome to your Q3 2025 results. I'm pleased to share our findings and update you on TechnoTree along with Indresh, our CFO today. Q3 results continue to demonstrate our commitment to getting our long-term fundamentals as a company right. As a headline, I would say we have crossed the chasm of being a cash-burning company to a cash-generating growth story. I've been a CEO in TechnoTree now for almost 10 years, And I would say technotree is a rare asymmetric opportunity. We are profitable. We generate cash. Our revenues grow faster than other competitors in the market, which is fast consolidating. And we are also in the fastest growing market segments, which I will explain through the course of this presentation, especially in the areas of cloud, AI, However, we seem to be trading much below P multiples of our peer group in the market. My commitment is to ensure as we move forward with these structural changes we have made that every year, year on year, the new revenue that we grow will create going forward and convert to faster cash. And as we move to mature markets, it will accelerate our delivery capability with AI and ensure that we move more towards a steady revenue growth capability with an ARR subscription-based model in the mature markets. Now, when we look at the key metrics, as you can see, this is a sixth consecutive quarter where we have had a free positive cash flow, 2025, 3.2 million year-to-date. This is not just an ad hoc one-time event. I think in the history of the company, this has been record continuous performance in terms of free cash flow. It's actually a very structured process that we've created to generate cash from our operations. And I'm proud to see our performance for guidance. In terms of revenue, we have certainly done well in constant currency. We grew by 4.8%. But we will have to strip away the Forex noise as we are definitely growing faster than the flat BSS market when it comes to revenue growth in US currency. Most of the markets that we sell are in US dollars and hence the Forex devaluation has certainly had an impact on us and hence the revenue in the quarter, of course, and for the year in in Euro terms is a negative 2%. From my own personal perspective, I would like to see this to be a positive number. And I have an aspirational goal by before the end of the year to make way to make this number positive as well. When it comes to EBIT in constant currency terms, again, we have done exceedingly well compared to 2024 at 13 million, we are at 14.9 of 15% growth. This demonstrates our underlying profitability. I will double click on this along with Indresh further in the presentation. But looking at these numbers, you can see that our fundamentals are right and we are a growth story. The next set of metrics are equally important and we are asked for guidance in most cases. If you look at the ARR, it's up by 8%. This is definitely creating stickiness with our customers. This is recurring revenue engine, which is predictable, which has high margin and has a compounding effect as we deliver more projects and more managed operations for our customers year on year. The real story here is definitely the order backlog, 40% up to 105.5 million. the strongest that the company has ever seen in its history so far. This is not just pipeline. This is actual orders booked that will convert in the next 12 to 36 months into revenue, along with more ARR. On the CapEx to sales, I think that we are doing well in terms of guiding that towards 12%, as we have said in the market, from the 19% of 2024, we are getting far more capital efficient as we use and adopt more AI in terms of improving our productivity and engineering velocity. While the DSO days are tracking a little under the guidance, we are certainly moving in the right direction in terms of the DSO days. The bottom line on the numbers year to date, I would sum it up as the metrics are right, ARR is up, CapEx is down, order backlog and collections are improving. This is definitely creating long-term share owner value. Now let's look at the detailed performance of Q3. We got three new deals in this quarter. creating multiple geography expansions from a market perspective. What is really important this quarter is definitely the five go-lives. The go-live of a tier one telco in US is extremely important to unlock and upsell more capability of our product stack into this particular operator in the US, but it also creates enough capability for us to go after other tier one telcos in the US market. Orido Oman billing GoLive and modernization in a growth market gave them a 3x performance improvement on their billing systems. The eSIM GoLive in a European market is a hot product for MVNX capability and will create business expansion for TechnoTree globally. And finally, the Tier 1 telcos that went live are not just pilot projects in MTN or in the Asia-Pac region. They are real production deployments in Tier 1 operations. As you can see, our key contributors for ARR growth continue to grow, and our stickiness with these customers in terms of expanding our footprint, giving them greater support to monetize revenue on the platform continues. But what's really compelling this quarter is the industry recognitions. And I would say two are exceedingly important. The first one is the Gartner recognition, where Gartner recognizes our AI capability to move from a niche player to a visionary. For TechnoTree, this is a feather on our cap, mainly because these are important validations in three ways. First of all, many tier one telcos in mature markets look to Gartner for references. Secondly, it also helps us to address more cloud and more AI capabilities for tier two markets and MVNX players globally. And finally, The AI capability that we have brought in attracts SIs to work closer with us, increasing our market share and also expanding our footprint into newer markets. This quarter, we have continued to also grow the product features. Today, we stand out of the box with more than 4,500 features in our stack. We definitely continue to deliver a lot of large-scale AI transformation capabilities to tier one telcos. And the billing improvement definitely is opening doors for new opportunities in brownfield operators. Now let's look at the details in terms of the revenue guidance. Let me unpack this a bit more. In constant currency, our revenue actually is right on the guidance up 5%, 5.4%. But in real euro terms, it's down by 2%, mainly because of the dollar headwinds that we have faced over the course of the whole year. I'm sure Indresh will talk a little bit more about the US dollar fluctuations, which was, while it appears temporary, seems to have continued across the first half, especially. But what is really critical to understand is the mix of the revenue. If you look at quarter three, while the license revenues are down and we had predicted because we won several new orders and delivered the licenses in the first half of this year, in the second half of the year, the deliveries for these customers have commenced and therefore the delivery revenues have increased. And we've also shown a very good positive increase on ARR revenue, which is, Exactly what we need in terms of front-loading delivery and services revenue will convert into higher ARR margins in six to 12 months. To me, the key takeaway is the fact that the revenue diversification to ARR and the subscription-based models are working for the company. They're definitely improvement in collecting revenue because of AI. And finally, as you can see, we are winning in mature markets, both in terms of revenue in the regions of Europe and Americas, but also in terms of order backlog within these regions. These markets are definitely lower risk, higher payment growth, and higher margin markets. When I look a little bit deeper into the revenue mix, I'd like to go backward and look at the last five years of performance. It's historical data, but it does tell a story. You can see over the last five years, we have added more than 40 new customers. The requirement at the time was the tier one legacy customers, Claro and MTN, wanted a better mix and a better portfolio of customers. customers who use technology products. And we took this really seriously into our journey. And we added 40 new customers, all of which have today more potential to cross-sell and up-sell. If you look at the ARR revenue, revenue was up in 2020. And then it took a slight dip and then moved back up again. That's mainly because of changing the customer profile. and adding new customers, which meant unlocking new license revenue, and then moving up these customers into more DevOps and ARR subscription-based models over the course of 23 and 24. But we also did certain other strategic things in the last five years. In order to enter mature markets, we had to conform to certain regulatory requirements. So we retired some very long standing customers that were giving us a lot of ARR revenue in the 21, 22 timeframe. And that also reflects in terms of the dip that we took in ARR, but we have sufficiently worked hard to replace those customers with new opportunities with our current portfolio of customers. And it's also important to note that we added seven new customers already this year. I wanted to take a little bit of time to really talk about the market positioning map and the five year trends that we are seeing in the market and why the TechnoTree long-term strategy is a growth strategy and we are extremely well positioned in the market. If you look at the first graph, you can see that the opportunities for Greenfield and Brownfield and the highest amount of Greenfield opportunities are definitely in Africa and MIA. And Technotree's presence in these markets are long-term. We have a long-term engagement model. We have a lot of reference operators who are tier one and therefore our ability to take on more digital transformations for Greenfield definitely exists. But we also see that there are new brownfield opportunities in North America and Europe. And these are large transformation opportunities that will create new ARR capability for us and new revenue growth opportunities. The first one of which we unlocked in the US market last year. In terms of the MVNO, MENX business, we entered the European market to take market share in the MVNO business. And as you can see, in terms of market maps, Europe and North America are the fastest growing MVNO, MVNX markets, and Technotree is well positioned in terms of its product stack to take market share in these markets. In terms of CAPEX and OPEX, again, Europe is more tuned towards an OPEX model, more an OPEX model, along with US, and this subscription-based model definitely means better margin, higher ARR revenue opportunities for Technotree. In terms of the BSS product stack itself, the highest call for action is in the transformation of the billing and the customer experience capabilities. And if you look at the IDC recognition as a major player, recognizing technology as a major player in customer experience, definitely ensures a sweet spot for us in terms of growing in the customer experience segment right across the globe. And finally, in terms of our own maturity in AI, we are seeing opportunities come up in the mere market for AI. And we are also seeing opportunities in Europe and US mainly with SI partners, partnering with us for faster growth. So basically this market map tells us that we are placing our bets strategically perfectly. We have done the right types of product investments. All today we need to do is to execute and the market will lift us to better growth. This is a very important slide for Q3 and I would request you know, the help of Indresh to unpack this a bit more. We did not make the Q3 expected numbers in terms of EBIT. The Q3 number for EBIT was 3.6 million, where compared to 4.3 million in Q3 of 2020, sorry, 5 million of 2024. Obviously, you know, the expectation in the market was a better EBIT. But there are reasons why we believe that it was prudent on our part to take the proper provisions that were necessary from a financial perspective. I will have Indrish talk to it a little bit more on the slide. But to me, what is really important is none of our customers have ever not paid us. I don't believe, even today, I think we are collecting receivables that are due from 2021 and 2022. Some customers, longstanding customers have, you know, we have realized the revenue so late into the game. So I don't believe that the revenues are, the overdue receivables are not recognizable, but I will allow Indresh to take this forward and explain a little bit more on the EBIT. Thank you, Padma.

Thank you. Good morning, everyone. Thanks for joining this Investor Call. As Padma mentioned, I'll explain a little bit on the EBIT front. As you can see, in real terms, our EBITs are lower compared to the last year. But again, do we measure ourselves on a quarterly basis or do we look at a longer period of YTD? When we look at the YTT numbers, we are given a guidance that will be up by 2%, and this is on the real numbers, not on a constant currency. As you can see, compared to the last year's first nine months and the current year first nine months, we are above what we had achieved in the last year, which means that we are in line to achieve what we have given a guidance. And now we'll look at what has impacted our EBIT in this year. and especially in this quarter, if you see. There are two trends I want to highlight. One is we have made certain provisions. As you know, the provisions are not write-offs. Basically, it's a prudent, conservative way of accruing for any future . So we have made a provision based on the geography in which my receivables are due and also the period for which it is outstanding. So that calls for making prudent provisions, which we conservatively do. And also these provisions get reversed when we get paid for such outstandings. And as Padma called out, we never had any bad debts so far in many years. But these are all accounting provisions which we need to make. But also, what is the other thing that is impacting our EBIT? If you look at it, the capex to sales trend, as you can see, last year, at this point, we were capitalizing about 80% as a percentage of sales to our capex. This year, consciously, we have brought it down to about 12%, which is the guidance we had given. And if we had continued the same trend of last year, my EBIT for this whole year would have been higher by another $4 million if we had captured it. And all these things, also, we need to understand that there are certain things which are external, like foreign currency leasing. If we had a constant euro-USD, probably our results would have been completely different. Probably, I'd like to take it at a later slide. But EBIT at this point, I would like to say that the provisions have impacted this. The lesser capex has impacted this and currency fluctuations have impacted this. On a constant currency, we are higher than last year. On a guidance for the first nine months, we are higher than the last year. Back to you, Pandit.

Thank you. Thank you. Thank you, Indresh. So what is also important is that our overall fundamental strategy, I keep talking about the long term profitable growth strategy of technology. If you look at the OPEX reductions that we commenced in 2024, they are still on. They are definitely giving us a good chance. capability in terms of lowering the overall OPEX from the 2024 51.2 to the projected less than 46 million euros that we have projected for 2025. And our headcount is also carefully managed and it's lower than what it was in 2024. So it's not just pure accounting, but it's also certain operational considerations that we are making in the business. And definitely the use of AI to boost engineering velocity certainly is continuing to help us. Free cash flow. Cash is king. Consistent performance of delivering Positive free cash flow for 18 consecutive months, I think is a record performance for the company. Therefore, this is clearly not a temporary phenomenon. This is a structural and I would have to say we have actually crossed the chasm to becoming a cash generative compounder. Now we are in a mode where our operations generates cash enough for us to invest and grow and ensure we pay higher dividends. on an annual basis. There are five long-term structural efficiencies, I think, in the business process that we brought forward over the last 18 months that has created this compelling story for TechnoTree. I already mentioned the OpEx reductions that we have benefited more than 5 million in permanent savings. As Indresh mentioned, the streamlining of our CapEx spent in line with the revenue growth. The cash collection, the think cash, do cash initiative of ensuring that we are able to target and invoice and collect cash periodically and in right intervals, notify our customers who do not pay the proper dunning capabilities. The predictable ARR revenue and the subscription revenue that is improving the revenue collection capability and therefore the cash collection capability, the revenue recognition capability, and therefore the cash collection capability. And finally, we brought in pricing discipline in terms of the deals that we go to market with. We are ensuring that we move away from non-profitable deals and do the right pricing, especially in mature markets. And that strategy definitely will improve our free cash flow going forward. So we had a negative cashflow trend in 2022 of negative 4.8 million. Then it went to negative 7.7 million to a negative 1.8 million. And year to date, we are tracking at 3.2 million. And I honestly believe we are on target to deliver a greater than 4 million free cash flow. And if we were to look at this in constant currency, what would it be, Rish? I mean, this would be a very different story, wouldn't it be?

Yes, if the dollar had remained equal to what it was at the end of last year, my free cash flow up to now would have been something like 8 million. And that's what we were expecting, or more than what some of the analysts also had expected last year, that we'll do 8 million in this year. We would have done it by nine months itself. That is something which is not in our control. Excellent.

OK, so this is my final slide. I think Technotree have laid out the story. We are poised for growth. The bottom line is we are playing in markets that amplify our growth and we are growing. We have made the necessary foundational changes that we needed to make to create a moat and to take market share from our competitors. If you look at the BSS market, it's performing at 2.2%. We are growing at 4.8% in constant currency. We're taking market share away in mature markets from tier one competitors. You look at the cloud BSS business, we are partnering with hyperscalers and bundling our offerings with them to reduce the overall TCO. And while the market is growing at 12% to 14%, majority of our deals are now cloud-based, and we are taking good amount of market share at 62%. You look at the MVNO, MVNX spread, especially in mature markets of North America and US, our order book is definitely clocking in a good amount of MVNO, MVNX opportunities at 35% when the market is moving below 10%. All of these key metrics tell us that we have made the right product choices. Our investment in TM Forum compliance has helped us definitely create a moat in the market. and create attractiveness to our products in terms of its ease and speed of implementation. So we have the right product mix. We have the right market. I shared with you all the market dynamics in the market map, and you can see that our ability to take market share in multiple areas across multiple geographies with multiple types of customers, enterprise customers, tier one operators, tier two telcos, et cetera. is a winning strategy. Our partner mix, whether it is partnering with HCL or Accenture, Tata, these definitely accelerate our growth. They bundle our products along with the services that they are able to add on, which increases scalability for us. And they often take us to the Fortune 500, especially in mature markets of Americas and Europe, which we would have otherwise never been able to enter. The business model of ARR and subscription is far more profitable, far more predictable, and we have the right team to execute this capability for Technotree. So I honestly believe this is the right investment thesis for growth of this company. Thank you.

Thank you. Thank you, Padmayi. I will take over from now. Yes, it's been a mixed quarter for us. We have done pretty well in some of the areas, especially on the cash. We were able to continue our free cash flow for the sixth consecutive quarter. The revenue, we have given a guidance of a low to high single digit growth, which I believe we are in pace to achieve that. EBIT margin, we had said that will be higher by 200 basis points. That's 2% as a percentage. That is also we are in line compared to the last nine months we have done it. Cash. Free cash flow, we are greater than 4 million. So far in the first nine months, we have achieved 3.2 million. Receivable days, we have 100 to 140. Currently, we are tracking around 154. And we should be able to achieve between 100 to 140 what we have given the guidance. CapEx2 sales, 10% to 12%. Last year, we were at 18%. From there, we are bringing it down to between 10% to 12%. Dividend payout is something which we decided at the end of the year. Depending on the free cash flow, 10% of that is the aim to pay out as dividend. and reduce the forex exposure to frontier countries by 10% to 15% in three years. But we are able to achieve it in a shorter time. Currently, I think we are at around 15% to 16% in our thing. Now, I'll go a little bit deeper into the numbers in a deeper way. Net sales, as we already said, is at 52.8 million compared to 54 million. This is power of ITD. That's from Jan to September current year versus last year. In 2023, we were at 56.2 and 22, we were at 51.5. A small decrease in terms of the real currency, but in constant currency, there is an increase by about 4.8%. And what we see as 52.8 would have been 56.6 if the currency side remained static as it was at the beginning of the year. The EBIT is at 13.2 compared to 13 in the last year and 16 million in 23 and 12.2 in 2022. Current year, we are at an operating margin of 26% compared to 24% in 2024. And again, reiterating the guidance is 2% margin enhancement. On the financial items, which mainly comprises of my exchange losses, currently we have lost 4.8 million on exchange losses against 3.2 in 2024. And in 23, again, we had a huge loss in one of the geographies at 4.8. And in 22, we were at a smaller amount at 300. Exchange rate losses in financial this year is what is included in the financial items is 3.9 million, whereas last year it was 2.2. Based on the lower EBITDA and the higher financial items and taxes, current year in the first nine months, we have clocked a net income of 6 million compared to 7.8 and 8.8 and 8.3 in the earlier years. The positive free cash flow, we are reiterating that again, for the first nine months is at 3.2, whereas last year it was negative 2.2. The other highlight what we have spoken in this year has been the orders what we received is at 90.5 million, which is one of the highest, against 54.2, 62, and 74 in the earlier years. Because of the higher orders what we have received, the order backlog is at an all-time high of 105 million compared to 75, 78 and 76. The earning per share is at 0.35. Last year it was 0.46. In 23 and 22, at a much, much lower one, but that is before the reverse split happened at 0.03 and 0.03. Now let's move into the next slide. This is purely only the quarterly numbers I'm going to speak about. Current quarter, as we have already seen, we clocked 18.6 compared to 19 million in the last year, same quarter. Revenue movement at the constant level compared to the last year in a real currency. But in constant currency, we were higher compared to the last year. The EBIT, again, 3.6. As we already explained, we took certain additional provisioning and we also made provisions for the third party contracts at 3.6. Last year, it was 5 and 6.2. Financial items, which is also an indication of how the currencies are moving, had more a stable time this year at 400, which is a positive, compared to minus 100 in the previous year. Taxes are at 0.600 this time compared to 0.8 and 1 million in the earlier years. Net income is at 3.4 compared to 4.1 and 3.2 in the earlier years. Cash flow, again, is slightly lower compared to the last year at 12.4. Order received is also slightly lower because we had a lot of orders coming in the Earlier period at 16.5. Order backlog as we explained at the end of the quarter is 105 and EPS is at 0.2. One more point here is financial items positive due to Forex movements and also we have provided certain excess interest in the earlier period and after negotiation we have brought it down and we have taken that into our accounts this time. Next I will go to the breakup of AR, which is one of the major asset items in the company. Currently, my AR stands at 35.8 million. Out of that, we are already provided for 5.7 million euros. Basically, as we said that the company has a policy based on the aging of the receivable plus the country in which these receivables are due. We do have a risk index and based on that, these provisions are made. And as a prudent accounting one, we would like to ensure that our receivables are adequately provided for. The other highlight I want to bring it to attention of the audience here is the DSO days. Our aim, again, between 100 to 140 by end of the year. As you could see in Q2 of this year, it was clocking at 175 days. It is highly oscillating given the cyclical nature of our collections. And on the breakup of these receivables, as you can see, nearly 25% are more than 270 days. That is where our major concentration will be to ensure that we bring that down. The rest of the ones are more in line with our industry standards where normal credit terms are 90 plus days. Next, I'm moving to the US Euro trend, 24 and 25, what we have understand from the experts. As you can see, Euro has strengthened against USC substantially in the current year, more than 13% since the beginning of the year. And most of our contracts are in dollars. That has hit us. Probably, I don't think any one of us have estimated or guessed that the dollar will weakened so badly and in such a short time. We are slightly recovering from the Forex impact of weakening the dollar against Euro in H1. Exposure to frontier countries, we have brought it down substantially and growth in mature markets are expected to reduce the impact of currency risk over a period of time. As you can see, our volatile currency was about 27% in last year and that is about 16% in the current year. Now I'll also go to the summary of our assets and liabilities. The intangible assets that are basically the products which are developed in-house, there is a slight increase in that. And our trade receivables are lower compared to the last year number and also as at the end of December by a slight amount. And other receivables are also trending at the same level of December, even though slightly lower than last year's September number. Because we are able to have more free cash flow and aggressive cash collections, my cash balance, which was about $17 million last year at this time, has gone up to $20.7 in the current year. The shareholders' equity, because of the increase in our profit, has been added. It's at 96.3 million at this point of time compared to 89.5 at the same time last year. There's no change in the compulsorily convertible debentures, which still stands at 23.1. Other non-current liabilities, basically for the employees' retirement plans, the liability accounted is 4.2 million. Current interest-bearing liabilities, there is a slight increase compared to the last year at 6.2. And trade payables has substantially come down from 15 million to about 10 million. Now, from our takeaway, I want to call it out the following. One, as Padma pointed out, six quarters of free cash flow and on track to meet the FI guidance. Just at this point, in 23, we had a negative $7 million cash flow, free cash flow. And the last time we had a negative free cash flow was in Q124. After that six quarters, we are able to achieve a free cash flow positive. Increase in provisions in Q3 resulted in lower EBIT. Operating margin is comparatively lower, but again, we are on track to meet the guidance. Healthy underlying performance on all parameters, the guidance is on target. order book at multi-year high and pipeline is stronger than ever. These are some of the takeaways from my side on the current financials.

Thank you Indresh. I think we can move to a Q&A session.

Thank you so much, Andres and Padma. Yes, I can confirm that we do have questions in the live chat and we also had questions arriving just before the live event started that a few investors would not be able to join the webcast, but they will be watching the recording and they submitted some questions. So I'll start with... Those questions, I apologize if the questions' fonts will be too small for you, but read them out loud from the chat. You reported a 19% EBIT margin in Q3 2025, well below expectations. Your guidance of 200 basis points for 2025 would imply a very strong Q4, almost like the 61% EBIT margin from last year. That looks to be influenced by other items or timing effects. Would that be a correct assumption? And what exactly are those items?

Okay, thank you. Thank you, Thomas, for asking this question. Thanks to the investor who asked this. Yes, if you look at the guidance, the guidance is normally given for the whole year and the guidance given is 2% or 200 basis points above the last year's margin. Last year we had an EBIT margin of 24% and current year for the first three months and current year we have achieved 25% in the first three months, which means that we are on track with the guidance. Yes, this quarter was affected by a higher provisioning and occurring for third party contract for delivering large transformation deals which we got. And also certain mobilization costs for ramping up the delivery in mature markets we need to incur this quarter. While the margins can fluctuate based on the business seasonality and project lifecycle, structurally, the company is focused on optimizing OPEX, improving CapEx sales, and building long-term predictable ARR. And again, just to bring it to the point, that normally last year also our Q4 EBIT was the highest in the whole year. So given that historical data and looking at the current year trend, we are confident of meeting the guidance what we are given.

Thank you, Andres. The second question, you announced a surprise receivables provision in Q3. Can you please give more information on which region this relates to and why it was booked under other operating expenses rather than financial items if it's linked to trade receivables?

Probably I'll take it again. Thanks. This is a great question. Thank you for asking this. I want to call out one thing. What we have made is a provision and not a write off. That's the first point I want to call out. And the provision is a standard We make prudently based on a set accounting principles and a policy what we have. It depends on the country. It depends on the aging and the country risk assessment, which we take it from the global websites. So we have a matrix through which we arrive at what is the provision that is needed. and we take it. Again, as I repeated earlier, provision does not mean a write-off, and also it does not mean that the provisions will not be reversed. When we collect the money, automatically that gets reversed. And also, a write-off could be a financial item, but the as far as the IFRS 9 is concerned any of these provisions we make is a operating expense and not a financial expenses and that is how we prefer to disclose it and that is how we show it as a impact on my EBIT

You talked about mobilization costs from new contracts in the US and Europe. How big were they and will they continue to weigh on margins? Do these costs currently contribute to revenue or are they more like investments at this stage?

Right now, the mobilization costs in Q3 are not really significant. So we have not calculated it separately. Typically, it's for onboarding teams in newer markets where we have digital transformation deliveries like US, Europe, Maya, South Africa, etc. These investments definitely support the project execution and then gradually generate ARR revenue in future quarters and years. It's really a strategic long cycle contracts that require this kind of investments typically and not quick revenue hits like in the past years. The payback will come with higher ARR over time because of the local delivery capability that we will be creating close to the customers that we serve in the markets that we serve. At a company level, I really believe that the significantly reduced OPEX compared to the last year will efficiently manage the resourcing requirements of these local geographies. And definitely the use of AI in our engineering velocity will improve productivity and also is already showing better cost management overall for us. So with all of these factors built in, this is not a significant event.

Thank you, Padma. You've had reoccurring foreign exchange hits this year. What's the remaining exposure and can we expect the volatility to ease now?

Probably I can take it. Thank you. Thank you again, Thomas. Great question. The YTD Forex loss, if you look at it, it's about 3.9 million, mainly coming from the hedge fund impact. In Q3, we had a small gain of 0.300 million. The frontier market share now is substantially lower at about 16% down from 27% what we discussed earlier. The local delivery and currency match contracts does create a sort of a natural hedge, however insignificant it could be, but still there is a natural hedge. The Euro-USD outsized impact on Forex last this year. I don't think we had factored this when we planned last year. Forex last is not structural. Large cost and revenues sit in USD. We expect markedly lower FX swings going into 2026 based on what we have seen in Q3 of this year.

Thank you, Indiresh. Next one. The order book is strong at $105 million, but cash flow is still modest. When will this backlog start turning into visible revenue and cash generation?

Probably I will take and then I can request Padma to add something. Yeah, these are all large transformation projects. These take, the timeframe is anywhere between eight to 24 months, depending on the complexity of the particular customer. Revenue recognition is cyclical with the license coming in earlier, followed by services through the course of deployment and followed by the support, which is in AR mode. Cash usually follows one or two quarters later due to the milestone payments. In Q3, free cash flow is about 1.2, as I called out, sixth straight positive quarter. And I hope 26, 27, we should have this uplift coming in the future, yes. Padma, you want to add anything?

No, I think you've covered it all. And I think... This is a record order book for the company. It speaks highly of the product stack and the standardization that we have achieved. And therefore, I would only say the more we improve the speed of delivery, the faster you can recognize the revenue and collect the cash. So that's where our focus will be going forward.

There are some similar questions, so I will take the first one. License sales collapsed to 0.1 million from 5.8 million year on year. What happened and when did they come back?

So I had mentioned this even in the H1 results that the nature of our business is digital transformation involves three parts. It involves licenses to be dropped to the client, then modifications, integrations, testing, training, holding the hands of the customer to go through some transformations themselves, etc. happen, which we call as services revenue. Then that's followed by an ARR model through which they can add more features to the product stack, or also manage the operations. We manage the operations for the clients. So this is a cycle of our revenue pattern. So last quarter, we heavily booked licenses. This quarter, we have started delivering the services on top of those licenses in the various geographies. Therefore, we are seeing the transformation has moved to a deployment phase. And once the deliveries and services revenue rise and ebb, you will start seeing the ARR revenues going up as new customers come on board. And this is the cyclical nature of our business and a normal pattern for most tier one telcos. We are working more and more towards a subscription-based model, especially with a smaller tier two telcos, MVNX kind of clients and cloud SaaS model clients. And that I believe will, where we will bundle both the licenses and the services into an ARR to improve revenue predictability and more timely cash collection. And that will be the change in the mix of revenue that we will see in the upcoming years.

Thank you, Padma. The $1 million per quarter free cash flow looks small. How much of that is operational versus timing or one-off movements? What is the role of new loans that the company took in Q3?

Okay, thank you. Interesting question. Sorry to be repetitive, but I need to bring it to everybody's attention that for multiple years, we had a negative free cash flow culminating at about 7 million negative in 2023. And in 24 beginning also, the first quarter, we had something like 4 million negative work free cash flow. Thereafter, we changed the way we operate. There was an initiative last year called Think Cash, Do Cash. All of that ensured that we started moving into the free cash flow positive region. This is the sixth quarter. We are continuously on free cash flow positive. Is that history is a justification for the current performance? May not be. But I want to also again bring one more parameter into this. Had the Euro-USD parity remained the same like at the beginning of the year, our cash flow for this first nine months instead of 3.2 would have looked something like 8 million in USD terms. The operating cash flow YTD is about 14.8 million, which is about 15% higher than the last year. And there was a question on why do we take small term loans, which is practically the way we look at is we operate in multi countries and in certain geographies, we are expected to give certain performance guarantees to our customers. So when we approach the banks for these guarantees, they insist that we do have a certain credit business with them. And also the same is given back to the bank as a security deposit for the guarantees on the issue. This is more for an operational reason why we need to be associated with some of these large banks. And again, as you can see, whenever I compute my free cash flow, I do not consider these loan into that. It's straight away from my operations is the free cash flow is computed as per the IFRS guidance.

Thank you, Inderush. And if I could ask that the next question and answers, if you guys could keep answers to about 30 seconds to a minute, then we could get through all the questions that are coming into the chat. So it's great that, you know, there's a lot of interest regarding our company's results for the Q3. So let's... Keep them short in the future. Given the cost base and provision, are you still comfortable with your guidance for growth and margin?

I'll try to answer so you can add. Yes, we are ready to meet the guidance for the end of the year, as far as I go. We have a healthy order backlog, which is converting and a strong pipe. And we expect the Q4 to be a strong ending quarter for us, as always. And as long as we can manage the execution risks and VR through the use of AI and other tools and further productization, our pipe conversion visibility is very, very good.

Thank you. What are the key priorities for the last quarter of 2025?

I'll answer this. I really believe it's converting the backlog into billings and cash. Collecting cash is the most important priority and focusing on the right projects that will ensure that we will invoice in the quarter and collect within the quarter. We also are focused on attracting global high skill talent across the board as we expand our market footprint. So both in the area of AI and cloud. So this is another key focus for the company. We need to manage our timelines. We need to deliver on time to make the invoicing and the cash collections also be on time. So that will continue to be a delivery pressure on all the engineers in the company and a pressure on management as well. Finally, using AI-driven efficiencies to maintaining cost controls and scaling into newer markets will also be an equal focus in Q4.

Thank you, Padma. As revenue contribution from North America and Europe rises over the next years, how should we model the net impact on gross margins given deferring professional services intensity, personal compensation levels?

Very good question. This is what we deal with all the time. I really believe we have transformed TechnoTree from a solutions and projects company to a product company over the last five years. It's taken a lot of capex. It's taken a lot of effort from our teams. And the TM Forum standardization and adherence to standards has definitely helped create a moat. We have placed the right bets, as you have seen, whether it's in cloud, whether it's in AI. We are quite an AI company, well ahead of the requirements for AI and telecoms. And we have created a moat. The product I stack and the partners today that we attract, especially the SIs, help us unlock more revenue in Fortune 500 companies in mature markets. And I think we will intensify embedding AI into our tools to manage costs, increase productivity, more automation in the process, less reliance on professional services. All of these things will help us manage the OPEX well.

Thank you. And shortly, what's your biggest competitive threat?

Oh, well, I don't think I have a competition because I really believe our real risk is execution. I believe the tier one competitors are consolidating and pulling back from mid-market, so they are not really a threat for us. The network and OSS vendors have very limited opportunities because they have legacy systems and are bound by certain geopolitics. Our other competitors, which are tier two vendors, but we are out innovating them in AI and cloud native and MVNO, MVNX capabilities. So they are not really a threat. The market is truly ours to lose. The only loss could be because of pure execution. So we really need to focus on delivery, delivery, delivery on time.

Thank you. How big is the share of work done by SI's personnel at delivering projects? Are SI billing Technitree or the customer directly?

They vary from project to project. It really depends on the role that the SI plays in a given project. Sometimes they come into a management role. Sometimes we train them and then they start delivering some of the services themselves. And also, I believe that, you know, what was the, can I just look at the question again? So the role of the SI continues to change. And I believe that there's some of the SIs built directly, some of the SIs built through us. So the combination also continues to evolve based on client requirements. But the partnerships are always strategic.

Okay. You mentioned in Q3 report that digital transformation projects in Europe and the Americas require you to incur mobilization costs towards hiring of local high-skilled talent to accelerate delivery. However, only two persons were added to your headcount in the other countries, from 37 persons to 39 persons. What type of costs do you mean with mobilization costs?

So there are many types of costs. In large transformation projects, there are also costs for people to travel to those locations, people who are highly skilled in the product execution, architects, product experts, managers, engineers, testers. Many of them have to travel, meet clients, work in the client environments, train clients to use our product, etc. So the cost is not just a hiring mix. The cost is high skill labor and mobilization costs to deliver the project on time using the capabilities we already have. We also have some third party and hardware costs depending on what the client requires, whether a bundled cloud or or on-prem infrastructure depends on the nature of the engagement. Having a productized stack and AI-driven productivity definitely helps us reduce the overall cost spent, but there are definitely localized costs that evolve during the course of the project. And then of course, maybe Indres knows in some cases because of the security requirements, we are even having to have some costs related to financing.

Yes. Okay, thank you so much. There are questions that we'll have to wait until a Indres interview or other type of session. There's also... Thankfully, questions that we have already answered in the questions earlier, so I will skip those, such as can you open up a bit more about which outstanding receivables you did take provisions for? There's also questions on the licensing. So great job answering those. But we are unfortunately getting out of time for the Q3 earnings call. We will be gathering all the questions that you guys have pulled in the open Q&A boxes. We will also be... announcing the Q4 sometime on our investor pages once we have those dates confirmed. And regarding capital market days, we are exploring. So if you have any questions or suggestions for Techmetry to join any European capital market days, please do ahead and do so. On my behalf, and if Indirej and Padma, we'd like to thank you for joining this Q3 call, and we hope to see and hear from you soon. So thank you, and... Can you sign off from Padma or Indresh?

Well, thank you, Thomas. And I'm looking forward to an excellent close of 2025. Thank you.

Thank you. All right. Thank you, everybody.