Talenom Oyj

Hello there. You're welcome to follow up, Talenom. Final statement released from June 2024. My name is Otto-Pekka Huhtola. I'm as a CEO. Here's my colleague. Matti Eilonen, CFO. Good afternoon.

I will start from the review period and the strategy progress, and after that... I will give the final figures of the group, followed by the country-specific figures. And finally, the outlook and the guidance.

Yes, this is our content today and let's go. Thank you. Short recap of last year. Moderate net sales growth, improving EBITDA, and this was our main target for last year. Our net sales increased closely 4% and EBITDA increased 9%. Also, software business separation market year 24. And I will recap shortly later on this, what does this really mean, what we did for our strategy. Internationalization has progressed as planned and here you can see three latest years net sales distribution and today under 70 percent of whole net sales comes from the Finland and the other parts from Sweden and other countries and as we told When we updated our strategy, we told that we will focus on our current target markets, Finland, Sweden, Spain and Italy. Strategy progress from last year. The first point is improving efficiency. As I told, we We improved the absolute EBITDA by close 3 million euros, so it increased 9% and a relative EBITDA by 1.3%. But we missed our target mainly due to economic cycle in Nordic, in Finland and in Sweden. Second point is platform rollout in Sweden. We achieved our target to transfer 50% of our number of our clients to our systems. And now we really work with the clients in our systems and we will work systematically and implementing our operation, best operations models and processes and one talent. best practices. So this will mean that we will get financial benefits in second half of this year. And third point is organic growth. Overall we succeed in acquiring new customers and generating additional sales to existing customers as targeted. But because of the recession in Nordic, we didn't achieve as good net sales as we estimated. And the other point is also that to develop our long-term scalable growth capability we began incorporating our own software and offering it to customers outside Talenom's accounting firm client and I will open more about that software businesses later on. Okay, what does this updated strategy mean and where it comes from? Our ambition is the growth. We are not happy current level, how do we grow today? And we want to focus on our core competencies and promote scalable growth. And now this software will be more scalable way of growth compared to service businesses. Key market trends which are accelerating growth. The first is the legislation on market trends, which boosts digitalization like PSD2 or e-invoicing, which will be a mandatory way sending and receiving e-invoices in the future. And we also see the customer's behavior is changing towards digital platform. Our clients are all the time more and more ready to buy services also via digital channels. And the third one is digitalization is happening now, especially in Spain and in Italy. The European accounting market and its evolution is close to 100 million euros and now our market will represent over 20% of the whole potential. And the digitalization is accelerated by many structural changes, as I told earlier. And we want to be in this digitalization wave and move. And we have good track record from that, from Finland. And we want to use this momentum, what we are facing on. What does this updated strategy really mean? The first A, the core remains unchanged. Our competitive advantage is based on a comprehensive approach considering the entire value chain through own software and services. Easy services, easy software for end users, automation for accountant and care will continue to be the foundation of our business in the future. And we are going to use these competitive advantages also future when we are selling, for example, B1, our software to other accounting firms. And B2 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 did invest last latest quarter our debt collection services to Svea, for example. Updated strategy is focused on the core expertise. As I said, competitive advantages are easy, automation and care. And our mission is we help entrepreneurs succeed. It means, of course, end users, but also in our software businesses, those platform accountants who are using our softwares, that they will succeed as well. And our vision is most preferred financial management partner. And this means that we will focus more to our own. And we know that our clients need some other services and software. So we need software partners and they need also us, because they can't also resolve the whole problems. clients have. So these partner ecosystems mean that we all need each other. And we really believe that by that way, when we are most preferred financial management partners, we are getting more leads to our core businesses. Short recap of that is that this is shared to four phases and the first one is from million to 15 is building digital capabilities and platform in Finland And after that, we see that we got digital transformations impact on performance in Finland. And we went to Sweden in 19. And after that started the third phases. And it's like strong investments in internationalization and software. We have heavily invested, we doubled our software investment level that we could use our software in other countries. And at the same time, we also made many, many acquisitions. For example, previous three years, we have made 41 acquisitions, mostly in Sweden and Spain. So we have been absolutely highest speed to get new revenue in this latest period. And we have invested a lot to making our management system and management board in new countries. but we are not getting any fruit of these investments. And now we also, the latest phase is that we are going to replicate our proven strategy and concept on internationalization markets. And when we are focusing more on our own, so we see that we have better capabilities for profitable growth, creation in Sweden, also well-positioned in Spain to benefit from the e-invoice reform. And when we focus our core, it means that we have more energy to focus our core businesses and we don't need to so much think about the other opportunities and so on. And the fourth one is that we have the new pillar, and it's the software businesses. And we really believe that in the long term, it will have a big value for the whole company. Our long-term financial target is that in the software business, that annual net sales growth would be over 20% and in service business over 10%. This year focus areas are the first one is improving profitability in Sweden and how do we do that is the systematic implementation of the software processes and the one Talenom operation model. One Talenom operation model means that we have like the framework And we have there is like the metrics and we have the activities. If we do these activities, it will have this kind of impact for this metric. And we have like written down all those activities which will have a good impact for our businesses from the personal or customer or financial or process or growth side. And the second one is the leveraging the entry into force of the Spanish e-invoice directive. Today most of our clients they don't use any software in their businesses to sell like sending receiving invoices. They are like making the payments via banking online or they are going to visit in bank office to make payments and so on. And when Spanish government really demand that you have to start sending e-invoices, so it means that most of Spanish small and medium businesses have to choose some software to use sending e-invoices. And we really see that this is the huge opportunity for Talenom. And third one is this building sales channels and developing software as a service capabilities in the software business. This is shortly my presentation and now it's your time, Matti. Go ahead, please. Thank you, Otto.

Welcome to follow Business Review of 2024 from my behalf also. Revenue for 2024 was 126 million, growing by 4%, and it came mainly from the acquisitions in Spain. At the same time, we made records in getting new customers, but the economic slowdown significantly impacted on the revenue gain. Last quarter, the revenue declined by 2%, and that's mainly because of the downturn in Finland and Sweden in the economic landscape. And that has significantly slowed down the organic growth there. Also the placement of the public holidays in December created more vacation than usual and that has also a big impact on the revenue because there was less working days during that month. Then we had some integration challenges which reflected on the personal turnover which led to the customer churn in Sweden. The EBITDA went up by 3 million and it came mainly from Finland and Spain. And then the development in Sweden with the turnover and that fact that we have the higher cost level because of the implementation of our software there has dragged down the profitability. Also, the one-time cost of reformatation of the software business dragged down the profitability for the full year. Operating profit was increasing a bit. On the last quarter, the profitability went down by 900,000, and the main reason behind that was the change negotiation, which had one-time cost by half a million. Also, that public holidays around December dragged down the revenue, which has also, of course, reflection to the EBITDA. And overall, the profitability development was dragged down by the net sales development, especially in Sweden. Operating profit went down even a bit more because we had increasing in software investment depreciation level. Net sales in Finland declined by 1.2%, ending up to 87 million. Even that we made the record in getting new customers, the economic slowdown has significantly impacted on the net sales. The average revenue per client is lower than it was before. Also, some business closures and bankruptcies, we saw that much more than earlier, and that has a reflection on the revenue gain as well. On the last quarter, the revenue declined only a little. It was almost the same level as year before. We saw that on that quarter, we saw that the purchase and the sales invoice volumes per client, it's not going downwards anymore. It's stabilizing on the certain level right now, which is a good thing. We don't see much growth on those volumes, but at least it's a stable situation right now. we are estimating that it's going to grow a little on half one and then possibly increasing on half two. And that, of course, gives us good growing possibilities for 2025. In Finland EBITDA went up by 2 million and that's because we launched the profitability measurements 2026 and we can still see some room on improving that profitability little by little in Finland. The profitability went down a bit on the last quarter and that's mainly because of the one-time cost related to change negotiations. And of course the revenue level also impacted on that because of the public holidays in December. The salary costs are pretty much on the same level as year before, so nothing really big changes and we believe that we have a good possibility in Finland to make profitability gain. Then net sales in Sweden, it went down by 5% for the full year and 14 to 15% on the last quarter. We have had some integration challenges, which has caused more churn in the first acquisitions we have made. Actually, five of those acquisition targets have suffered from the higher churn than normally we have. And of course, the same reasons as in Finland, the economic slowdown has an impact on the revenue and also this placement of the public holidays around the Christmas. Right now we are in customer retention. We are under pressure on the short term. We need to work on that, of course, but in the longer term, we believe that our own software operating methods and processes, we create longer term benefits and possibilities to grow in Sweden. The EBITDA level in Sweden, it's on low level, it's 1.1 negative at the moment. and of course that's because of the revenue gain lately and also that we need to keep the cost level a bit more higher because we are implementing our own software. Later on last year we adjusted our personal cost against the revenue level and we can see that development on the on the Q4 that it's on the same level as year before. The Q4 is the weakest quarter of the year, but the good thing is that it is not going deeper and it's on the same level. We believe that we have good possibilities to improve the profitability of Sweden also the next year. Then the other countries, which is Spain mainly in these figures, we grew by 80% last year and a little bit over 16% on the last quarter. It came mainly from the acquisitions in Spain. But there is a good evidence of organic growth as well. If we take those clients, the amount of clients what we got, and those clients that we lose and the difference is clearly positive and if we convert it to euros it was almost a one million during the 2024. So it's been positive all the time and it was accelerating towards the end of the year. And if we add e-invoice directive on top of that, which is going to be the mandatory thing for all the companies between 2025 and 2027 in Spain, and we have a good product for that, where the software and service is combined into one package. I think we have pretty good setup for the business growth in Spain because of those two things. The EBITDA went up in Spain more than 1 million and that's of course because the volume is on a higher level but some efficiency gain as well. On the last quarter, it declined a bit. It's clearly the weakest quarter of the year, so it went down a bit, but nothing really serious things going on there. A little bit variation between quarters and also these public holidays around the Christmas has an effect on that. So despite of this slightly weaker quarter, we believe that we have a good possibility to grow and improve the profitability in Spain. Then a little bit about investments and depreciation. We were investing getting new customers. It went up a bit, ending up to 3.7 million. Our software investments are 15 million, so increasing a little bit from last or the previous year. and much less acquisitions in 2024. It was less than 3 million and it was a little bit less than 19 million the previous year. We just finalized at the end of the year our change negotiations and that means that our investment level to the software is going to be 2.3 million lower than it was before. So around 12.5 million for the next year is going to be our software investments. That's of course good for the cash flow and also good for the depreciation level in the future. We are right now in overall in our systems really good shape and it was possible to bring it down to this level this whole investment permanently. The board's dividend proposal is maximum 20 cents and 10 cents of that it is proposed to pay after AGM and later on according to board's decisions maximum 10 cents. The annual general meeting is going to held 19th of March. Then finally, the outlook and the guidance. We announced our guidance in mid-December and we estimate the net sales to be between 130 and 140. and EBITDA around 36 to 42 million. This also includes some strategical acquisitions in Spain amounting to two to four units and which means in euros around two to four million. Thank you very much.

Okay, thank you. And now it's time for questions.

Thank you for the presentation. Let's have a look at the questions in the chat. First one comes from Martin Hammerström. In Sweden, integration challenges have caused more customer churn than normal. Is it the rollout of the talent on platforms that makes you lose customers? And if so, Is it the consultants or the end users that are reluctant to move to the platform?

Good questions and I can say that the rollout of our systems in Sweden is not the main reason. And the reason is the integration when we have made the acquisition. I can say that the first five acquisitions that we made, so we didn't have enough like resources compared to activities or projects that we rolled out and that's had the impact for the personal journey and after that the customer journey. And this started five years ago. And now we see that in those five offices, we have been non-unnormal customer journey. And we see that the software rollout, it will have also positive impact for our customers because for customers where we have rollout are the smallest funds and they are not must use anymore any software.

So like that way. Thank you. The next one comes from Sven. Could you describe more about the new customer acquisition in Sweden and the competitive situation in the market? How is the overall new customer acquisition process going now?

Yes, we have two channels to get new clients and one is our own Salesforce and so we have the team who is like contacting new potential clients and getting the teams and meetings and after that trying to close the deals and the other way is that our office managers so they will get a recommendation from the customer bases and focus energy for those potential clients and making the deals and the most of the new deals comes from the office managers and what was the other questions so

how is the new customer acquisition in Sweden in the competitive situation in the market and how is the overall new customer acquisition process going?

Yeah, so it's Sweden market is also like more more maturated compared to Spain for example, but Finnish market is most matured and after that comes from Sweden and there is good potential softwares also and why do we win the clients so we can like resolve the whole problem software and services and we have the proactive service models also.

Thank you. A couple of questions from Talenum shareholder. Talenum seems to want to transform itself into a software house, a product house. Have you considered how big a change this is for the staff and how big a change of a mindset this is for management decisions? Are you making a cost-effective software product that can be delivered in short time without months of customization to each customer?

Yeah. I'm sure for the latest is that, yes, we don't need to configure it anymore if we get the new clients or new accountants. And the first one was how to lead the whole company. So we have reflected very much of that and we have divided in the top level also that who will focus for service businesses and who will focus for for software businesses and we understand that we have to be like these software businesses, we have to be like own organizations and in service business also and that there's like a little bit wall between those and that way that the people who are in the service business they have to focus 100% for that and to try to win the clients with better services and with trying to resolve the growth problem we are from those service organization strength point of view and also in this software business also that we try to grow there also basic our strength in software businesses but it starts from the top level also

Thank you. Last question, Tallinnum shareholder continues. How good a level of cultural competence do you see for foreign business in comparison to how many times companies that have been successful at home have made the mistake of thinking that the cultural culture abroad is the same as in Finland? And as a result of this mistake, they have gone down the wrong path.

Yeah, this is right questions. And we have did many, many activities and we have learned also very much. And in previous two years, we have like created our one Talenom concept together with country directors. And this has been like the big education journey to a whole management team that how to get all countries working together with the same method, same processes, same best practices and so on. And when we went to Sweden, we didn't have a concept how to implement best practices. And we learned by doing things. But after some years, we understood that we have so many things and people can't put the things right. level or right places and they didn't understand that which activities have will have impact to which metrics and so on and now we have like good metrics which we have the evidence that if you do these activities it will have this kind of impact to this metric and now we like start implementing this OneTalenum and country directors have been also creating this OneTalenum framework. So good questions and very important and I hope that we have learned a lot. And now we also invited country directors as group management team members. So we have now better communication possibilities also. And they are also in our accounting business management board. So they can share the issues between the countries.

All right. Thank you. This is all the questions we have at this time.

Okay. Thank you very much and have a nice day. Thank you. Bye.