Talenom Oyj

Hello everyone. You are welcome to follow up Talenom business review of Q1 for 24. My name is Otto-Pekka Huhtala. I'm a CEO of Talenom and here's my colleague. CFO of Talenom Matti Eilonen. Hello everybody. I will start from the strategy progress and some topic of last quarter and after that Matti will open more about financial developments. So let's go. Our EBITDA improved by 13.4% and strategy implementation has progressed. As you see, our net sales increased 9%. And there was a little bit of challenges regarding market situations. Positive side is that our EBITDA margin increased 13.4% and it was 9.5 million euros in Q1. We have told also that we are now focusing more about organic growth and inorganic growth is slowing down and these investments level regarding acquisitions decreased over 60% as planned. some words of European accounting markets. We made the decision in 2017 that it looks like that we are going to be so big in Finland that our market share is going to be so big that the potential growth rate that it will be over 15. So it will be hard in Finland. So that's why we made the decision that we have to go to some foreign countries. and we both first company from Sweden just five years ago and Swedish market is double sides compared to Finland and later on we have gone to Spain which is 10 times bigger and also to Italian which is like 12 times bigger than Finland markets And what we have seen in Finland is how this digitalization transformation from traditional accounting firm to nowadays digital accounting firm as we have, how this change has developed and how we have done that. So this kind of environment changes are going to happen just now, for example, in Spain, And for example, this e-invoicing will be as a mandatory way for sending and receiving invoices in next one and a half year. And we assume that this will have a positive impact the whole demand of our whole package, accounting service packages. That's why we are seeking the whole Europe and our growth ambition is so high and now we are in those four countries and we will grow there. Shortly our vision which is unbeatable accounting and banking services for small and medium enterprises And this means that we will focus for those two things. And we have like blue ocean strategy. It means that we have our own software, our own platform, what our clients are using, and also our own internal person, our accountant. This means that we can like lead the whole value change from customer to customers. and the effect for customer is that they have very easy to use mobile applications or browser used applications and so on and we try to make our clients daily basis life as easy as it possible and the other side at the same time when we are like resolving our clients problem we can all resolve at the same time our internal issues and that's why we have developed our automation and it's very high and this is the reason why we have so high EBIT level today in Finland and this automation will save time of our account and this save time will be used more for clients that focusing for clients and customer centricity and we can like care better of them and deliver some add value services and keep better touch than competitors have capabilities. We have a proven strategy and strong track record of this digitalization transformation. and you see this there is like our revenue figure and this line is our EBIT margin comparable EBIT margin and what we did before 15 was that we made our transformation from traditional paper accounting environment to whole digital accounting environment and we in 15 we had more or less ready our like customer interfaces and also our own bookkeeping software the first version of that and what was the result what we what were the benefits regarding this digitalization you see this in figures 16 to 20 And our EBIT margin tripled in this period compared to before that time. And now we are going to duplicate this strategy. Just now in Sweden, we are implementing our software there. And we are just now in this 15 years dip there, where we are investigating so much for implementing our software. And Matti will open more about this. impact for figures later on. Our internationalization progressing as planned today. Less than 70 percent of revenue comes from Finland and 20 percent comes from Sweden and from other countries mostly from Spain. 11 percent comes from there. And how do we see future this kind of development? What we see in this slide is going to continue. And today we are growing fastest in Spain and second Sweden and then Finland. And we also see that in Southern Europe, there is also good, positive growth level in country environment compared to Nordics, where we have a recession ongoing. Okay, some words of strategy progress in Q1. The first topic for this year is improving operational efficiency. And now we can see first impact of that in Finland. and we started our profitable actions last year and now we are getting some results of that second one is platform rollout in Sweden and this is ongoing as planned and why do we do that is that when we migrate our clients to our platform we have evidence that we can like save time over 75% of accounting routines, monthly routines. And Matti will open later that how this will, which kind of effect this will have for our EBITDA margin in country level compared to Finland. And the third one is organic growth. We have continued developing our digital buying processes and we are getting some good results regarding that. And other hand, we have made some key employee recruitment to boost our organic growth later on. Okay, this was my slides and now I will take

mattis beach here you are all right hello everybody welcome to follow this business review of talent first quarter let's start from the group level figures our growth was nine percent ending up 34 million and the increase of the net sales came mainly from the acquisitions in spain Organic growth slowed down and that was because of the recession and the economic situation going on in Nordics. And it significantly slowed down our organic growth, especially in Finland, but in Sweden also. Our first priority for this year was make a turnaround in the profitability growth. And that happened in the first quarter. Our EBITDA went up 1.1 million and also the relative EBITDA was better. Operating profit went up almost half a million and slight improve also in the relative profitability of EBIT. The EBITDA improvement came mainly from Finland, and as Otto told us, it was because we launched efficiency measurements and profitability measurements in Finland spring 2023. In Sweden, we are in the middle of implementing our own software and that dragged down the profitability significantly in Sweden. In Spain, we made good progress and with the volume boost or when the volume is on a higher level, we were enabled to improve the profitability significantly in Spain as well. And let's move to country specific figures. The revenue in Finland was on the same level as last year. And that was because of the recession and the economic slowdown happening in Nordics. And it has a certain influence on figures in Finland. The transactions of customer volumes had come down a little bit, which has decreased our revenue per customer. There has been also increase of business closures and bankruptcies much more than usual. We were able to offset this by getting new customer acquisitions so that we could improve the growth there, but the economic situation dragging down the growth. In Finland, we made pretty good progress with the EBITDA improvement. It went up 1.1 million and significantly the relative profitability went up almost to 40%. And that was because we made some changes and improvement measurements in Finland 2023. On the other hand, the economic slowdown has also impacted on Finland profitability. if there was no recession and the business was running like it used to be a little bit growing all the time in finland we would have possibilities to make even better profitability in finland in sweden we grew 3.4 percent ending up to 7 million and that mainly came from the acquisitions The same kind of phenomena is happening in Sweden as in Finland. The economic is slowing down and we can see the same kind of effect also here. In Sweden we have slowed down our acquisition progress there and we are more focusing on integration work and particularly getting implementing our own platform. We have strong Trust that in longer term, this will improve the efficiency, profitability, and also for organic growth opportunities, it's really good. In the short term, as we can see that our EBITDA went down from 800,000 to almost zero. In the short term, the resources which are required for this project to get it through it is declining the profitability significantly. And here is some view about this, that what's the differences in Finland and in Sweden. In Finland, we have strong software expertise and really high automated and really efficient processes in accounting. And we can see that our profitability measured by EBITDA, it's been around 40% for several years already. And the lower line is EBITDA in Sweden. And as we can see, it varies between zero and 10%. And the most significant factor there is this automated processes, which can improve the profitability. Based on our experience in Finland, we have measured that it's possible to bring down the routine work to almost one quarter what it used to be. So 75% of improvement in routine work. Of course, that opens up a good possibility to improve the profitability and also it enables us to provide value-added services to the client then business development in other countries spain and italy we have nice growth there more than 200 percent ended up to almost 4 million and it came mainly from the acquisitions in in spain However, there is good evidence of that we can grow also organically via our office network in Spain. In Italy, we have continued our studies on accounting market and we hired the country director there. And according to our studies, it seems to be that Italy is quite hard for inorganic acquisition based growth. And instead of that, our first priority is to grow organically in Italy. As we get the volume up in Spain, that also has an influence on on the profitability and it went significantly up in the first quarter. The Spanish accounting business is profitable measured by EBITDA, but the profitability is dragged down because of building up the organic growth and relatively high share of supporting activities. We have measured that with the current supporting activities, it is possible to grow the volume without growing the supporting activities significantly. And the outlook and guidance for 2024, it is unchanged. We are expecting to have net sales between 130, 140 million and EBITDA between 34 and 40 million and operating profit between 14 and 17 million. Thank you very much. And I believe now it's time for questions.

Yes, there are a few questions in the chat from Ben Horner from Granula Capital. The first question. Can you please outline the specific reasons for the growth reduction in Finland, alongside if you will be able to increase prices this year to boost organic growth?

As I told, the volume-based transactions went down per customer, and that has an influence on the revenue per client. And usually when the economics start to boost, it comes with the delay to us. But of course, when the environment in the economic situation, we should be able to put back in the revenue and also increase the prices per customer.

Okay.

Do you want to add something? That's okay.

The second question, can you provide an update on customer numbers and churn in Finland?

Sorry, but we don't tell customer figures out anymore.

And one more question. Are you planning to continue the M&A activity in Spain as planned?

Just now we have a hold regarding acquisitions and we are going to get all integration things in place before we are going to continue acquisition and mostly we are seeking that how we could grow faster we are organically and this is like the main topic just now but when we have like end of this year maybe it will be possible to stay possibilities to make some strategic acquisitions, but still we are preferring organic growth.

Yes, thank you. No further questions in the chat.

Any more questions there? Okay, thank you very much and have a nice day. Thank you, bye-bye.