Talenom Oyj

Hello, you are welcome to follow up Talenum H1 report release. My name is CEO Otto-Pekka Huhtala. And here's my colleague.

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

And shortly, I will go through our content today. I will go through review period and strategy progress and also software business. And after that, Matti will continue with financial development and outlook and guidance. So thank you. Let's go. Some highlights from Q2. Comparable net sales increase driven by Finland and Spain. Second one, we also launched our new brand for our software business, which goes today Jaasar. And we ended our piloting of software sales in Finland for external accounting firms and their clients. And this pilot went successfully. Third highlight is that customer base growth continued at 4.7% annually. From a financial point of view, this highlights, as I told, how comparable net sales increased driven by Finland and Spain. It increased 3.1%. And EBITDA growth came from Spain, while Finland and Sweden remained at the comparison periods level. So EBITDA was 1.2% over last year. compared to last year and it was close to 10 million euro and right hand side you can see that our accounting business revenue is around 30 million was around 30 million and software business was around 5 million in Q2 and now we will go to the strategy progress Everything started from our target and it is growth. And Talenon will focus on our core competencies, which what we have developed many decades, like accounting businesses. We have been there over five decades. And we have developed our own software over two decades. And now we have these two pillars and we will grow with those. And by that way, we believe that we can have more scalable growth potential than before. Some market trends which are accelerating growth. First is the legislation and the most important is that these trends are driving digitalization. For example, e-invoicing, it will be mandatory in, for example, in Spain near future. Second one is customer behavior is changing to our digital platform. We have also experience of that. We have sold our services more and more via digital way. Third one is digitalization is happening now, particularly in Spain and in Italy. And I will tell more about that later. By this slide, we will open more about history and our proven strategy and strong historical track record. So we can see that our high investment pace is over and our fruit is going to be colleagues near future. There's four phases. The first one is that when we developed our digital capabilities and platform in Finland, And the second one, 16 to 20, you can see that when digital transformation impact on profitability in Finland, so our comparable EBIT increased third time, fourth time, what is before that phase, when we implemented all our digital features in place in Finland. And third phase is here that we strongly invested in internationalization and software. Of course, we have built our organization in Sweden, Spain and Italy. And we have also localized our software in Sweden and now it's in use there. So, for example, in the last five years, our software investment cost has been over 60 million euros, and we have also acquired over 30, close to 40 million euros in other countries than in Finland to acquire new businesses. And now it looks like that our software investments is decreasing, as we have told before. And this four phase is that replicating a proven strategy and concept in international markets. So we have good capabilities for profitable growth created in Sweden. And Matt will open more about later of that by figure. We have well positioned in Spain to benefit from the e-invoicing reform. And now we are more focused company. We are focusing on only for our core businesses. We don't have any more like new business areas. And the fourth one is the software business becomes the second pillar alongside the service business. And it will be the scalable one also. Here's three strategic priorities for this year. First one is improving profitability in Sweden. Second, leveraging the entry into force of the Spanish e-invoicing directive. And the third one is building sales channels and developing SaaS capabilities in the software business. What we have done in Sweden, we systematically implemented one talent operating methods and process as well as our propriety software. We also invested in turning net sales on the growth track. And third one, we estimate that profitability will improve from the comparison period towards the end of the year. Matti will open later a figure, but now we are seeing that we are now in the same profitable level and turnaround is ongoing well. Second, strategy progress capitalizing on the entry into force of the Spanish e-invoicing directive. So it's good to know that officer has decided in Spain that businesses who are sending invoices, they have to use Stamped software, this kind of software what officer has accepted and when they are invoicing in the 1st of January, they have to use one of those listed software and we have built these capabilities to our own software that we can like respond to market change. And we also continue to roll out our proprietary software to our customers to facilitate their business and prepare them for the invoicing transition. So we have well positioned in Spain and this looks like very good just now. When we compare this situation, what we have seen 10, 15 years ago in Finland, so it looks like very good. Okay, how about software businesses, sales channels? We hire business leads appointed in Spain and Sweden. And Talenum Software brand loans, as I told, Talenum Software also will operate under the EASER brand from now on. And EASER means easy advisor. So we think about so that By using Azure, you can easily find good advisor and it helps you manage your businesses because it's so easy to use for, I mean, for entrepreneurs and of course for accountants, it's so easy to use. Okay, piloting of software sales in Finland to external accounting firms and their clients was also successful. And now I will open more about software business. What it is really. Okay, so we approach so that we have like two interfaces. The left side hand, you can see Azure app, which is a dedicated interface for the entrepreneurs. And in the right hand side, you can see the Azure Accounting, which has developed for professional for accountants. And by dividing these two interfaces, of course, they have the same database, but two different interfaces. We can really differentiate from the other competitor softwares by offering easier tools to use for, for entrepreneurs and enterprises. And for accountant, we can offer the good process and software, which is very, very high automated. And by that way, they can like save time and make more, more profitable. Some figures. Today we have over 12,000 small and medium enterprises clients. Our annual recurring revenue is over 20 million euros. This comes mostly from Finland, maybe 99% of that. And we have over 60,000 end users, over 9.5 million transactions annually, I mean sales and purchase invoices. We have like in four countries, 140 full-time employees, logins per month over 200,000. And today we have over 60 partner offices in Finland already. And just remind that we started to sell our software for other accounting offices. We call those offices partner offices and the beginning of that this year. So we really see that this has successful well. And some development in the number of customers. If I go through these lines, the first line there is the SaaS charts separately. These clients comes from the mostly from the Finland. And this means that easier or directly invoice sees end customers for software. So easier don't invoice talent and talent invoice. and don't invoice software to the end clients. So the both businesses, EASR will invoice their own clients and Tallinnum Accounting Business will invoice their own clients. Second row is SaaS Not Charged Separately. These are the clients who are using our software and these are from Sweden and and Spain, software fees are not yet charged separately and are partly included in the service prices. And during next fall, we are going to make decision via Patket that how do we going to start charging those clients. But it's good to know that we estimate that the average revenue per customers in Spain and Sweden is around half or less compared to the price level in Finland. And third row is that potential customers for software as a service. So these kind of clients who are only service clients, This comes also from Sweden and Spain. There is a large number of customers who are not yet using the software. And of course, now we are hiring new accounting offices and they have started to sell for their own clients. So those clients will come over that software. figures when they really succeed selling their services and DALENOM LSO software for end clients. But we see that there is the big potential of this conversation in current businesses, but in the long term, of course, the bigger part of the growth will come from the other clients than DALENOM service clients. Okay, this was my stay and now Matt, go ahead, please.

All right. Hello and welcome to follow this half year reporting review from my behalf also. Let's start with the net sales. Net sales grew by 3%, a little bit more than 3%, ending up to almost 35 million. And it was driven by the successful customer acquisitions. We were able to get new customers in Finland and in Spain. We also made one small acquisition at the beginning of the second quarter. which boosted up the net sales growth a little bit. On the other hand, the development in Sweden, it slowed down our growth and because the net sales remained below the comparison period in Sweden. Then profitability. Profitability slightly increased. The EBITDA on the second quarter was almost 10 million and the relative profitability was 28%. And this time the profitability or the EBITDA gain came from Spain, while Finland and Sweden remained on the same level as last year. EBIT level went down a little bit by 300,000, ending up to 10%, a little bit more than 10%. And it was obviously because of increased depreciation level. In the past, we have experienced quite long and high investment level. And right now at the development side, we are in the phase that we can lower down our investment significantly. So on the last quarter, our own software investments decreased by 1.2 million and For the full half year, it was decreased by 1.9 million. That, of course, immediately improves the cash flow, but it will also have the impact to the future depreciation level. Then country-specific numbers. Finland net sales increased by 4.6%, ending up to 23.5 million. And in Finland, the market situation is getting more steady. We learned that the Talennon customers transaction volumes decrease. It has stopped now. It's not yet increasing, but at least it has stopped. And because we are able to get new customers all the time, then we can turn this to net sales to growth. Finland EBITDA level pretty much was on the same level if we look at the absolute numbers, a little bit less than 9 million. The relative profitability measured by EBITDA decreased a little bit. In Finland, we are seeking for the growth in the future as well. And for this quarter, the EBITDA remained at the same level because of the growth cost. But we are not so worried about the development in Finland that it will stay the same level or that it will decrease. We look to the future that we still have room for more efficient processes and more profitable slightly in Finland in the future. net sales in sweden it decreased by nine and a half percent ending up to 6.5 million and that's mainly because of the customer journey in 2024. lately we have seen that the trend is turning to better in getting new customers and and shared so we estimate that this decrease will slow down towards the end of the year. But 2025 is going to be significantly lower than 2024 measured by Nets sales. EBITDA level on the last quarter in Sweden, it was pretty much on the same level. And even though the net sales decreased, we were able to scale down our costs at the same time, but we didn't want to do it too strongly because we want to secure our cross possibilities in future as well. And Spain. Spain grew by 18%, ending up to 4.7 million. The organic growth and the sales is working really well in Spain and it's starting to come through. Also, we made the small acquisition at the beginning of the period, which boosted up the growth. We believe that the organic growth, we have good possibilities to grow in in Spain, because the nets that the sales is working well. And also the mandatory e invoice directive is going to be placed in Spain and we have good possibilities to offer services for that both in software and accounting services. EBITDA in Spain also grew by 300,000, ended up to 14% on the relative EBITDA. And we were able to bring more volume to the business and that came true as a better profitability. will focus in the future to improve the profitability by streamlining our processes. There is multiple things that we can do better and we believe that there is a lot of room to make it more smoothly and to increase the profitability in the future as well. Also that we acquire recurring and profitable customers in the future. Then a little bit about the business areas. The accounting business was a little bit less than 30 million. And the second quarter is seasonally the best quarter of the accounting business. And the software business was 5.3 million. And there is not that much seasonality in the software business. That's our estimation. Accounting business EBITDA was a little bit more than 20% ending up to 6.1 million and the software business was 3.6 and the relative profitability was almost 70%. Then last, the guidance. We remain with our guidance at the same level. We are expecting to have net sales between 130, 140 million and EBITDA around 36 to 42 million. Thank you. And let's have a look if we have any questions. Okay, Anton is asking about, will software investments decrease more than Q2 level? If yes, by how much? Well, we saw that on the first quarter, the investments on the software was around 800 and now it was 1.2 million. It might decrease a little bit, but I think that the biggest decrease has already happened and it will be more mightily in the future. But it might be a little bit more in the future.

And totally it's between 3 to 4 million euros. In a year, yeah. Yeah, it will decrease that.

Yeah. Yes. Okay, is there any other... Emil Immonen, do you want to ask anything?

Can you hear me? Yes, we can. Great. Thanks for taking my questions. Just a couple of ones. First on your operating costs. Are you doing any cost cutting now for H2?

Well, not really any specific, not more than usual. Of course, we are quite careful with our costs. costs and so on. But we also want to maintain our future growth possibilities. But nothing really specific cost cutting. Of course, in Sweden, when the net sales is decreasing, we need to follow the net sales with the cost as well.

maybe i would add that we believe also that we can get better profitability in q3 in finland than it was q2 i'm i'm in the comparable contract again then to maybe continue on that do you expect that if you only reach the lower end of your sales guidance can you then reach your ebitda guidance

Well, at this stage, we don't want to comment too much on guidance. We remain at the same level. We think that we have good possibilities to increase our profitability on the second half. And of course, we try to follow the cost so that it's in line with the next sales as well.

Okay, then that's clear. What about the top end of guidance? Is it possible to reach that in any way or what needs to happen?

Well, it's now 130 to 140. And as you all know, we might do some acquisitions in Spain. And if it happens soon, we would still want to keep the room for it. If it doesn't happen quite soon or at all this year for some reason, then of course it is closer to 130 rather than 140. but we want to make the room there as well that because you never know about the acquisitions, if they're going to happen or not, that might be some minor thing that will, will stop the acquisition or push it forward.

Okay. I understand. How about your balance sheet? Do you feel that you have the capacity to do more MTA? I mean, your net depth starts to be quite high. So where's the covenant level and, and your confidence on that?

Yeah, we are quite confident with the covenant levels and also that we renewed our contract in Oulu where we have a big site and that increased our debt by three and a half. million, because the IFRS 16 standard, and that press it down a little bit the equity level and, and increase the net debt. But right now, we are okay with the governance and, and we think that we have possibilities to make the acquisitions as well in the second half.

Okay, thank you so much.

Okay. Thank you very much. If I shortly summarize, because there is no more questions. So we, our net sales increased and we are in well position in Spain because of the e-invoice directive will be implemented soon. And we also see turn around in Sweden. So it's looks like great in future. So it's right time to the next step to the continue our vacation so have a nice summer everybody bye bye thank you bye