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.