BTS Group AB (publ)

Good morning and welcome to this presentation of BTS Group results for the third quarter 2024. With me here today, I have our CEO, Jessica Skaun, to present the report. But just as a reminder before she starts presenting, please, if you have any questions, call in or send the questions through the group chat. Jessica, please.

Thank you, Michael. Hello, dear BTS investors. Welcome to our Q3 report. Look, the third quarter is particularly hallmarked by the recovery of BTS Europe in terms of returning to growth. And so overall, at the group level, our revenue grew 8%, group profit EBITDA up 13%, and we had margin improvement from 8.4% to 9.2%. I think another highlight for us in the third quarter is we continue to see proof points that our overall strategy, global strategy of focusing on strategic accounts continues to generate bigger deals and do it at the global level across all three operating units. If we double click into BTS Europe, we have basically significant profit improvement because of their turnaround. And what's behind the turnaround? As we mentioned, in the first and second quarter, BTS Europe was struggling with a lot of projects that were, one, being delayed into the second half, and they were able to work on other projects in the third quarter. Also, I think the sales initiatives we've been doing over the last year, year and a half, are also taking shape in terms of increased number of meetings, number of client conversations, number of proposals the team is writing, having the senior people in the field, and so forth. So overall, BTS Europe, after a really tough first half, grew their revenue 5%. And as a result, their EBITDA tripled from 2.9% to 9.2%. If we look at BTS Europe, they have a strong pipeline moving forward. We focus on our biggest unit, BTS North America. General sentiment of the market is the team is winning really cool work, really large strategic projects, the fast-moving projects as well. And I would still say that the sentiment in North America is that margins and profit improvement is still top of mind. And we still have many different company-client examples across industries where cost control is on the CEO's agenda. In the energy industry in particular, we started to sense a more conservative approach. And pharma and biotech industries continue to have strong growth for BTS North America. Not only do we help them solve more and more problems, but there seems to be a lot of interest in BTS partnering with them on their new product launches and their growth initiatives, in particular using our AI bots. In the third quarter, a lot of the conversations you can imagine across companies was kind of a wait and see, a general conservatism waiting for the election to be over. If we look at BTS other markets, the SEAC acquisition, the company that we acquired in Thailand, who's the leader of the market there, the integration is going really well. It's going according to plan. It gives us a stronger footprint in Southeast Asia, which is one of our target growth markets. And overall, thanks to the SEAC acquisition in particular, the net sales increased 16%, and that 8% growth outside of the acquired revenue. Overall, if you look at the entire BTS Other Markets portfolio, where they operate in 16 different countries, it was a mixed quarter. Some markets doing extraordinarily well with the Southeast Asia region and the Middle East, while others, including Southern Europe, in particular Italy and Spain, were affected with project delays, longer deal times to close. And it felt in Italy and Spain similar to the market realities that the rest of BTS Europe were experiencing in the first half of the year. So if you look overall, we're happy that we've had another quarter of revenue and profit improvement. BTS North America, our biggest market, growing 6%. The margin has exceeded last year's margin every quarter so far this year, and this particular quarter by just a little bit, 8.9% to 9%. BTS Europe's big improvement. I mean, first we have to recognize that last year at this time was not great. But the cost controls that Europe put in place over the last five quarters are in the system. Plus the fact that the project launches are moving forward and the growth now is contributing big time to the margin improvement. BTS other markets, however, even though they have the growth, the margin is dropping from 11.6 to 10.6%. And this is based on two big reasons. Reason number one is the company that we acquired in Thailand has lower margins than BTS average, which we know. And there's plenty of ideas we have to increase that over time. The other reason is the poor performance of BTS Italy and Spain. If they had actually had the revenue targets, then the margins would have improved. BTS APG, which is a very small part of the business, in general they sell smaller projects and they're continuing to be affected by client delays and lower demand. So what else happened in the third quarter? We launched a lot more AI tools. I would say I'm really excited by the pace with which BTSers are bringing our AI bots to the market and co-innovating together with clients. So the Wonderway acquisition we made the quarter before is really progressing nicely. We've gone live now in clients in every single unit, so North America, Europe, and most of the world. We have real-time, just to remind you what the Verity product does, is for the first time that I know of, we are able to plug into Zoom and Teams and provide real-time performance, analytics, coaching, and assessments back to the people who are doing the work, having the client meetings or having the preparatory meetings and so forth. It gives real-time coaching and advice, but against the specific unique strategies and sales plays of our clients. We also have a lot of our clients asking for our standard bots and building custom bots with us very quickly. So we are rapidly building out an architecture and bot platform so that over time we can make them faster and faster, and clients will also be able to build them themselves. But the number of clients doubled from Q2 to Q3 in terms of the clients using our bots were upwards. I think we had 13 or so in the last quarter. We're at about 26, 27 now in the third quarter. And you can see the overall performance over time in terms of the Q1, Q2, Q3 quarterly performance over the years. And profit before tax. And we continue to focus on being a long-term successful company where we have growth and profitable growth every year. You can see our average growth has been 12% year-over-year CAGR for revenue and average EBITDA growth is 15% per year. Stable and growing dividends since IPO, excluding the pandemic year. This strategy remains and will continue. And our outlook for 2024 remains unchanged. So we expect our EBITDA result to be better than 2023. Okay, thank you very much and open it up for questions.

We have some questions that have come in through the chat. Okay. And the first one that came in was actually from a Philip. He was wondering about what happened in Netmind. He's saying, could you clarify the reversal of the earn out? Is it a result of poor performance or simply a reflection of expected performance in the acquired entity?