Talenom Oyj

Hello everyone there in online. You are welcome to Talenum Business Review of Q3 and updated strategy. I'm Otto-Pekka Huhtulainen, CEO of Talenum and here's my colleagues. Christian Dierhoff, Country Director of Sweden. Hello.

Hello everybody. My name is Matti Elonen. I'm CFO of Talenum.

I will start from the updated strategy. It's the hot topic today. And after that, Kristian is telling more about our software project in Sweden. And after that, Matti will explain more about our latest financial figures. So thank you. Let's go. Target state is the good starting point and I would reply that our ambition is the growth. We want to grow faster, more scalable and focus our core competencies. This is the basement for the whole updated strategy. some drivers which are boosting our accounting business industry the worst one is the legislation regularity things which are boosting towards digitalizations it means that because of the For example, e-invoicing will be as a mandatory way in Southern Europe near future. This means that small and medium-sized companies have to also adapt for their own businesses some software to receive and send electrical invoices. The other one is customer behavior is changing towards digital platforms. And the digitalization is happening just now because of the regular things. And also, entrepreneurs are seeing so much benefits for their own businesses. And of course, platforms are ready for the transformation. Some words of the European accounting markets and the evolutions the whole site is around. 100 billion euros. And we are now in Finland, Sweden, Spain and in Italy. And this is roughly over 20 percent of the whole market size. And the digitalization is accelerated by many structural changes. For example, Labor shortage together with increasing regulations forces us to seek more effective practices. So it is not possible to work in this industry. We are old. You have to adapt new technology. because we don't have people to do same things with the old practice. As I said of e-invoicing, it will be mandatory, for example, in Spain where we are during next year. The transformation accelerated by digitalization offers a pioneering opportunity to grow, and Talenum has decided to exploit this growth potential. And now we go do our strategy. There is like three pieces. And the first, A1, is that the core remains unchanged. and it's like 85% of our businesses which pays it for that. We have a long time developed our processes and product and software for easy interfaces for customers, automation for accountant and that means that we have more time for care our clients. And this is like about 85% of our revenue is this accounting business. And there's like B1, B2. The first change is that we separate the software business into its own company. and begin offering our software to other accounting firms and their customers. And this is roughly 15% of our net sales. And the second change is that we focus on our core expertise by transferring all non-accounting services and products like debt collection, banking and financial service to our partners. And we have good experience of that way of working. And this is the very... small part of our businesses, which has been, and also with negative EBITDA. So, and now I will go through all phases. So, our foundation is to consider the entire value chains. We understand the needs of both entrepreneurs and accountants. So, we are in accounting office. So we know well what we really need and we have developed our softwares more than 20 years so we really know what the enterprise really needs. So this is the end-to-end process what we really understand and our whole core competitive is based for that, that we really understand the both side needs. And we focus on our core expertise, easy. We make our customer life easier. And automation, we use the latest automation technology and AI tools and so on. And we make our accountant life easier. And this means that we have more time with our clients for care premium services. We have made like about 50 acquisitions in the previous five years. And we have reflected which has gone well and which has gone not. And we have created one Talenom concept that how to run accounting businesses well. And we have written down that in this kind of concept book. And it's basic for the systems and automations. It's the one part. And the other part is the leadership and process. And together with that, we can achieve the high profit margin and offer also premium services. This gives framework to our team leaders, unit leaders, that they can mirror their own job against the best practices. Because those things that are in our concept are tested and we have evidence and this works in our business. And if you get the high points of all areas, we know that those teams and units will succeed. And this is like way how do we run the service business and achieve high results there. And this will give the best practice, will give the best benefits for our customer staff and owners, of course. And good to know that also that previous five years in Finland we have got new clients because of the good service and it's basic for the good concept not for the software because in Finland this is the most like developed accounting business where we are in those countries and the technical software has been available many many years And there's a little bit different, differentiate against the other software from the, if you like, put a list of the features from the customer point of view. So how do we win the new clients? We win because of the good services. And this is good to know. 10 years before we won new clients because of the software, but today because of the service. Okay. Separating the software business will accelerate scalable growth. And we have a unique market approach. As I told, the strengths of Talendo software is based on understanding the entire value chain from both the end user and the providers. And this is what the other software businesses have not. And The software has been developed on the top of efficient processes. This journey, how we have developed our software, has started in 2002 from the customer interfaces. The first 10 years we focused on that. And after that, during this period, we also developed our processes with digital tools, with customer digital tools and after that we also started to develop our own bookkeeping systems and it's developed above good processes and end of that we see very good results. Of course, this will strengthen management of this, like from support units to business units. It will give more transparency and helps them to lead software company and also it can focus easier and better for those main clients' priorities. And our target group is from 0 to 10 million euros companies and Now we don't need to like focus for the bigger ones. We can keep those kind of clients in our focus. And this means that we can use some other software also for the biggest ones in service side. Okay, the second change is non-accounting services and products are offered to clients through a partner ecosystem. We are developing our partner ecosystems and this means that we only develop core services and software. We don't combine with our partners. We want to be most recommended partner for financial management and services such as banking collection and financing are delivered through partner ecosystems. So we believe that when we focus our own and we recommend our partners so we have good experience that they are recommending also us. When we compete with them so they are not so ready to recommend us and so We believe that that way we are getting more business to our core services. And some of our partner services like banking services is good and important for us that we can win the new clients. But after that, it doesn't matter so much who is going to producing it. And some words of Talemon's software unit. To be separated into its own company, so it gives transparency for the market and for the other accounting firms, that how we are charging the clients, so they can also see that we are going to charge only the end users, not the producer. So this is like fair play and open for everyone. We are estimating that the net sales will be between 15 to 20 in Finland. And the updated strategy will result in a lower cost base. The system architecture renewal has progressed and it can be utilized by external accountants. In addition, the renewal makes it easier to bring the software to new markets. And we have heavily invested in previous five years and now we are ready to go new markets and we can decrease a little bit of our investment level and And this is also important part that the software unit will focus on future developing and strengthening the core capabilities of ease of use and automation, not the other features or needs what our partners can offer. The company reorganization is estimated to lead to 2-3 million annual cost savings. And the next steps are that we are going to reporting this company as own company starting from Q1 next year. The software company will charge the end user directly for the software and the number of customers is accepted to grow rapidly as the software is rolled out to existing customer, especially in Sweden and Spain and sold to external user will start. We are going to hire internal software business expert to lead the company. And this process has also started. Okay. Updated strategy is focused to the core expertise. Some of you have followed Talenom for a very long time and you can see that there's these three things which have been placed in many many years. Easy routines for our clients, automation for our accountant and this means that have more time for care services and expertise services. Our vision will be most preferred financial management partner. And our mission, we help entrepreneurs succeed. And in nutshell, Talenum will focus on strengthening its core expertise and grow its accounting services and software businesses. We continue to develop our excellent accounting services as before. We're going to continue to grow. We are organic and we are acquisitions. And launching software sales to strengthen growth opportunities. This is the big new step for us. And seeking growth through partner ecosystems. We really believe that focusing on our own, we can recommend our partner and we are getting leads from them sides also. Some words of the future. We are going to focus our current markets where we are. And with updated strategy, we will remove the previous medium term targets for 2023 and 2025. And our long term target is annual net sales growth of more than 20% in the software business and more than 10% in the service business. We will provide guidance for 2025 later on. In 2025, we will focus on future improving profitability in Sweden and in Spain. You will hear more about Sweden situation soon, and we really believe that we are getting financial benefits next year. and building sales channels for the software businesses. Shortly, we aim stronger and more profitable growth through two pillars to conceptualize one Talenum service business model and the more scalable software business. This is in shortly. My presentation and now is stage is yours, Kristian. Here we go. Thank you.