BTS Group AB (publ)

Hello and welcome to the BTS Group AB Q4 Report 2020. Throughout the call all participants will be in listen only mode and afterwards there will be a question and answer session. Just to remind you this conference call is being recorded. Today I am pleased to present Henrik Eklund. Please go ahead with your meeting.

Thank you very much and thank you for listening in. I have the pleasure of presenting the Q4 results and the 2020 results for BTS. And if we change to slide two, Q4 market. And I would say also there will be a chance to ask questions at the end of my presentation, which would be 15 to 20 minutes, and then there's time to ask questions. So slide two, Q4 market. The market continues to recover. Customers are resuming operations, and while they at the beginning were reluctant to change from physical to virtual delivery they are now quite comfortable on on doing so and growing more comfortable what we can say is that in in the second quarter when clients were quite reluctant to to try virtual delivery now they are very comfortable and what we are hearing from the from our clients is that even after the pandemic, when you can do any travel you want or any physical delivery you want, they will still stay with a lot of virtual and digital solutions. So that's a very exciting development for us. Now, the next slide, three, a little bit more on Q4. So we've seen a gradual improvement of a quarter over a quarter. And interestingly, We have a unit, a region called Other Markets, which basically covers everything except outside Europe and the United States. They were first into the pandemic and severely hit in the first half. They are first out of the pandemic, and we are actually achieving a similar result. in the fourth quarter in other markets and actually higher margin than before. So that's a very positive indication on what we can expect once our business moves out of the pandemic. So if we change the slide forward, here you can see, of course, the dramatic drop in 2020 with all quarters being significantly worse than before. the year before in 2019. And of course, The core reason is the pandemic and the stop of all physical deliveries from March and onwards, and the time lag to get in to virtual. On top of that, a number of clients who actually stopped buying education training during the year because of their issues. Now, you also see the quarter-by-quarter improvement from Q2 to Q3, from Q3 to Q4. And we... We are seeing a continued positive development when we look into 2021. Changing to the next slide, slide number five, January, December 2020 revenue and results. You can see that there are some very ugly numbers here. We are used to always delivering revenue growth and profit growth. You can see that total revenue declined 19%. currency adjusted and the profit 60 to 80 percent dependent on which line you look at um and if we look at the next slide slide six per business unit uh you see that we have we do have uh across all regions um a a a similar decline in revenue and a big decline in profit and in margin um and looking again then at next slide um slide seven on the q4 you can see that there's still a significant negative development but it's better than the average for the year and much much better than what we had back in q2 when the crisis hit us the worst the next slide slide eight looking per unit in q4 you can see again very interesting that other markets who were first in to the pandemic and had a terrible first half they are turning out of the pandemic and is delivering very good profit development and a much more positive revenue development than the other unit and now these four slides describe a numbers that we're not proud of. A lot of minus signs and declining revenues and declining profits. But what is important is to understand the story behind these numbers. We have deliberately chosen a long-term strategy for 2020. And very early when the crisis hit, end of February, we decided to do a couple of things. Number one, to focus all our resources to as quickly as possible go virtual with our services and number two not to engage in tapping down our organization and dismissing people because a that's a fantastic organization we don't want to tear down half the hotel because it was empty and also we knew that if we diverted resources into too many things, our transformation to virtual would be much slower. So behind these numbers, there is an enormous amount of time and money invested in going virtual. So these negative signs really show an investment into the future because we are convinced that the future yes physical delivery will come back but virtual and digital will be big and by focusing on that and transforming as quickly as possible and also keeping our organization while also putting more money into technology and product development that's the long-term focus we have so we have deliberately in 2020 not tried to maximize profit We have acted during 2020 in a very consistent way to build a business that can grow, continue to grow revenue and profit after 2020 in a way it has during the first 18 years we were in the stock market. So it's very important to understand the story behind these numbers and the long-term plan that we have in place. So if we switch to slide number nine, A part of the strategy that we started in end of February, early March of last year, was also to build a cash position, a cash position to handle any difficulty in the business, in the market, but also to be ready to make acquisitions. So we built a much stronger cash position for the future. Looking at slide number 10 on revenue and operating profit per year, you can see the quite remarkable development we have had since we entered the stock market in 2001. So skipping the extreme year 2020, we have delivered 14% revenue growth per year during these 18 years. And the vast, vast majority, 12% or more, is organic. And at the same time, 18% growth per year in EBITDA. So that is something which, of course, is shown in a big increase in dividend, in a big increase in the share price. And then you see the dramatic development in 2020. And again, 2020, we've been thinking about one thing, and that is how do we keep those bars growing? How do we keep that EBITDA growing on a longer-term perspective? If we change slides and then to slide 11, you can see that this growth in revenue and profit has paid off for the people who have been shareholders in the company. The next slide, slide 12. So how do we come out stronger? What do we mean by coming out stronger? What have we focused on in 2020? Well, really four main things. The first one is the customer base. So what we've done here is we have really, in a way, restructured our customer base. Compared to the clients that were dominating for us a year ago, we are currently much more in the industries that are doing well. So tech, pharma, consumer products, financial services, and a couple of others. Whereas the industries that are still in crisis we do a lot less. And that shift has contributed to the quarter-by-quarter improvement. We've also made sure that we maintain relationships with all our old customers, and we want a lot of new customers. So that's number one. Number two, the broader offering. Physical delivery will come back for sure, but virtual will take a big share going forward. The business community has learned that they can do a lot of work and a lot of their training and education virtually and with many advantages. So that will continue a lot. So the exciting part here is that we now have virtual and digital and physical. So we can offer three different modalities for our clients. And that is a broader and interesting offering. Also, we have spent a lot of money on innovation and product development during this year. The companies of the world, our clients, the big corporations are facing big changes from COVID and they are changing right now. And we've put a lot of effort innovating to meet those changes and be able to offer the most modern content addressing what is really, really important to them. And thirdly, the stronger organization. We've seen quite a bit of competitors who've been cutting down on their organization. We've kept our organization. We have also switched. It's been a good market for hiring. We've hired some people. Some people have moved on. So today we have a stronger organization. And we also made a bet on marketing. We've increased our marketing budget and our marketing resources to take our exciting message out into the marketplace. So changing to slide number 13 on the dividend. So the board has proposed to the shareholder meeting a dividend of one krona and 20. uh for 2020 and that's basically uh executing on the policy um that dividend represents 66 percent um of the profit after tax in 2020 so so it's the dividend at the upper end of this policy and this dividend should be uh distributed twice a year if the shareholder meeting will follow the proposal from the board looking at slide 14 And this is really what is important. We know that the shareholders of BTS are long-term shareholders that are looking to profit from the year after year growth that we've proven and the year after year profit improvement we have been able to achieve. And that's why people are shareholders in BTS and that's what shareholders hope for going forward and what we aim for. And the reason why, you know, there's a reason, you know, that we can we can we will be able to achieve this. We are in a large market. We have a global market. We're in every major market in the world. And we have a small market share in this fragmented market. We have an offering. It's stronger than competition. This is why we're growing faster year after year. And I would say we've strengthened that position due to our long-term orientation in 2020. And we invest in growth. We invest in our people, in our products, and in marketing. And we also invest in acquisitions. to drive the growth. So we are very well positioned to continue our growth path from 2021 and going forward. And speaking of acquisitions, I'd like to mention a little bit about Bates. Bates is a business located in the northeast part of the us in boston with 23 employees 7 million dollars in revenue it is a very good business with you know working with top of the house um clients both in terms of the lemon and and the clients um And through this acquisition, we're getting access to a foothold in the Northeast, which is a big and attractive market for us, where we have not been that big. We're getting access to some really, really talented people. There's a lot of senior people in base with great expertise and with great client contact. We're getting access to a very interesting customer base. And also... uh bates have some very interesting content that we don't have that we then can bring to the bts community customer base so we are very excited on this uh acquisition and we have already won several of these together and are working closely together so this is a very exciting move for us this acquisition in boston now looking at 2021 We have said that earnings will be significantly higher in 2020. Now, that is not going to be difficult, given what a tough year 2020 was. But we've clarified and said we believe it will be in line with earnings in 2019. And 2019 was the year before the pandemic and also a very strong year for BTF. So we are out of this to deliver earnings in line with 2019. Slide 17 shows our shareholders where there are not really any major changes since the last quarter. So I'll stop there and invite any questions.

Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw a question, you may do so by pressing 02. There will now be a brief pause while questions are being registered. The first question comes from the line of Richard Engberg from Eric Pencer Bank. Please go ahead. Your line is open.

Good morning, Enric. Good morning. Good morning, Mr. Engberg. How are you? Well, I'm fine. I'm a bit grey here in Stockholm. But I have a couple of questions if I may.

So, my first question is regarding the guidance for 2020. Will you return to the profit levels of 2019? Will that be driven by a higher margin or acceleration of growth? So, I mean, it is very clear that from from from a very basic analysis we need to do both um to get to 2019 um bernie's level so it would be a combination of both okay and my next question is uh regarding the cost base uh do you think that you have the well the cost place to reach the uh 2019 level of profits right now in terms of cost also confidence or will be increasing You know, we always recruit, but that's an ongoing process. We recruit to upgrade the organization and we recruit for the future growth going into coming years. So 2021 should not be an exception there in terms of always recruiting and trying to find new people and building for growth. Okay, thanks. Those were my questions.

Thank you. Just a reminder that if you would like to ask a question, please press 01 on your telephone keypad. As there are no further questions, I will pass back for any closing comments.

Thank you everyone for listening and thank you all shareholders for staying with us. during a very tough year for our industry. And thank you for holding the shares and believing in our long-term strategy. We will for sure work very hard to continue to achieve strong growth in revenue and profit as we have done before, except in 2020. I think that concludes it and we can close the session.

Thank you for attending you may now disconnect your lines.