BTS Group AB (publ)

My name is Richard Engberg and I'm an equity research analyst here at Eric Pansen Bank. With me, I have Mr. Henrik Ekeland, CEO of BTS Group, here to present the quarter. Henrik, welcome and congratulations for another fine quarter.

Thank you, Richard. Yes, Richard and their shareholders listening in, we are happy and proud to deliver another record quarter for BTS. We now have 18 consecutive record quarters in a row so from mid 2016 and until today not counting 2020 which was a year when we couldn't really run our business um but since mid 2016 quarter after quarter 18 quarters in a row we have delivered record revenues and record results and we are very very happy for that and we i will present some more details for you here um Well, first of all, the market. It's a very strong demand for our services. It's driven by the rapid change among the top businesses of the world. And virtual delivery is where basically everything happens now. It is fully accepted as a replacement for physical delivery. However, we see now with the pandemic slowing down and things becoming more safe that the physical deliveries are coming back quite uh strongly looking at q4 the underlying revenue growth in the actual operations is so 17 so that is adjusted for currency and for the fact that there was less cost in um 2021 than 2019 for um travel there was no travel in 2021 so we are making basically all our comparisons with 2019 Because beating 2020 is simply too easy. So we compare with 2021. And the EBITDA of Q4 was 13% higher than in Q4 of 2019. If we count it in Swedish krona, if we look at the underlying growth in the profit, it is 26%, but lower because of the change in currency rates compared to two years ago. Our EBITDA margin got to 15% and we now have a new goal. Let me come back to that a little bit further. And for the whole year of 2021, we had 18% better results and revenues, more than 30% better if we count away the currency impact. So we are very, very pleased with 2021 and with the fourth quarter that we have delivered. And here it gives a bit of a perspective of the record development. You can see how revenue is growing quarter by quarter. It is going in the right northeasterly direction with an exception for 2020. And as you know, in 2020, the physical training stopped and that was hard for us to really run our business in the normal way. If we look at the profit, you again see the northeastern trend, but then even stronger. So the profit growth has been even stronger than revenue. And now talk about EBITDA margin. About five years ago, we were down at 10%, 11% in EBITDA. I said, now we're really going to work long-term, long-term to get to 15%. By using many different tools, becoming more efficient, pricing in a more optimal way, taking out unnecessary cost, moving to more profitable customers, more profitable projects, a range of devices. We've been year after year improving our EBITDA margin to the goal of 15%. And we're pleased with that. It was a five-year journey to go from 11 to 15, really four years. 2020 was an exceptional year. And we have decided to set a new EBITDA margin goal at 17%. So this is now our new long-term EBITDA margin goal. Looking a bit more at the numbers, you can see here the EBITDA growing, revenue growing 18%, currency adjusted, and EBITDA at 18% as well. Looking for each business unit, you can see that in 2021, we've had fantastic development in North America and also in other markets. has overall done well in most of its offices, but we've had a big decline in BTS Germany due to two big projects which kind of ended mid-year, just before mid-year in 2021. So Germany had a difficult year with a big loss and that impacted BTS Europe, which in our other geographies did quite well. I should also say that the overall revenue growth of 18% in 2021 compared to 2019. 12% is organic and 6% roughly is from acquisitions we have made. Moving on here to Q4. Again, you can see the numbers that I just described and same thing on the profit side. You can see here Europe's decline. which comes fully from what has happened in Germany and the continued work in other markets. In North America, actually, we had to postpone some work into Q1 because of lack of resources. So North America could have grown faster, but we decided to move some projects into Q1 because of quality reasons, because of work-life balance for our people. Many of them put a lot of hard work into last year. And, you know, you may ask, why are we so successful in 2021 and over the last couple of years? There's really two main reasons. The first reason is that the market is growing. The market is really favorable for our services because of the speed of change. in the business community and also because companies want to invest more in their people and secondly we are taking market shares we are you know through our innovative approach our investments in digital our investments in marketing we are winning more and more business taking market share and Just an overview of what you can do. You can see the seven main practice areas that we have here. So it's seven different areas. And this makes it possible for us that once we come into a client, we can serve that client across many needs or for many years. And as you know, we always communicate that the average length of a customer in BTS is seven years. So our revenues are coming back year after year due to this breadth. and our ability to work from top to bottom to serve our clients on all their levels. So this broad portfolio is a very good competitive advantage and a way to really create recurring revenue. And just a few words of the pandemic. It was very dramatic for us in early 2020 because we faced a situation where basically our business stopped. What we did was physical training. And all of that was closed down and stopped in early 2020. And we decided at that point in time to see 2020 as an investment year, to not focus on profitability, to keep all our employees and to switch everything to virtual and digital and not care about the profit in 2020. And that has really paid off that long term. We moved fast, but we thought we acted with a long term perspective. And that has really paid off. Look, compared to competition, we have grown our distance to them. In digital, in virtual, we have our resources still at the base. We've innovated a lot. We have a stronger organization, a stronger customer base, and a much stronger offering. So it's very interesting how a potential crisis for a company, if you think long-term and act fast, how you can use that to level up the business. And we see that in 2021, and we see that as we move into 2022. The business has been leveled up. And we continue, you know, of course, our share price has done phenomenally over the last five years. So why should you own shares in BTS given this growth? And I think a lot of people, when they look at BTS, you know, they see that BTS, our growth opportunity is really limitless. We are not confined to a Swedish or a Nordic market. We are all over the globe and we have less than 1% market share. And we are taking market shares. So really in a growth position. We have this long track record of growing and growing and growing both revenues and profit. And obviously our financial goals that we have now upgraded on the profit side. I think people find that also quite attractive. For the dividend, the board has proposed a dividend of 4 krona and 80 euro, which is a 33% increase compared to 2019. We didn't grow the dividend in 2019, but this dividend is really in line with how profit has grown since 2018. So we're keeping a consistent dividend. policies there and we're keeping our strategy of being able to create both rapid growth and strong cash flow so that we can give dividends to our shareholders. And for 2022, we are expecting our results to be better than in 2021. In 2021, our EBITDA was 288 million krona, excluding a loan that was forgiven from the US government. We're not taking that into account. So we will have a result which is better than the outcome in 2021. So this is the same outlook we've given for the last five years. And in all of those years, we've upgraded during the year to significantly better, except at 2020. So that is looking into 2022. This is the stock price, as you can see. It's been, since we went to the IPO, we performed clearly better than the market. I'll stop there, Richard, and looking forward to your questions.

Thank you, Henrik. And my first question is, Can you describe the driver behind this margin expansion that you see going forward? And how long do you think it will take? It took you five years to reach 15%. What is the timeframe here?