Cint Group AB (publ)

And good morning, and welcome to the Q4 2024 results presentation for Ascent AB. My name is Patrick Comer. I'm the CEO. I'm joined here by Niels Boone, our CFO, and we're delighted to walk through our results with you. I think the overall headline is that there's no significant change from what we previously presented at our strategy presentation on January the 27th. So we'll be going through these details with you today. As a reminder, as to our business model, we are the world's largest survey exchange. Our primary business is the matching of survey respondents or users to the thousands of surveys that are run by our customers globally every single day. Alongside that, we also have a growing media measurement business, which has been capturing a lot of growth and attention with our company over the last several years. In terms of Q4, the overall story is flat, with further improvements to our EBITDA margin. We do have a slight decline in sales in our media measurement business, offset by lower sales in our CENT exchange. We've seen basically a pull forward of revenue from Q4 into Q3, based on the overall political polling environment in the US. Also, we have an ongoing platform unification and migration process that will be completed in 2025. In brief, our numbers. We had net sales and euros of 45.4, gross profit of 40.2, operating expenses of 27.5, and EBITDA of 12.7, all in line with expectations for what we previously announced as our numbers. some significant events during and after the quarter. I hope many of you were able to join us in late January as we talked about our new strategy, which we call CENT 2.0. We also talked about the rights issue, which we're in the middle of, as it were, where we're raising 600 million SEC, of course, subject to approval with our EGM. And also we announced our new financial targets, which were an update of our financial targets for the first time since our IPO in 2021. And reviewing those financial targets, I'd like to speak to them individually now. The first major target is the sales growth. So we're looking at a medium term organic annual sales of above 10%. Additionally, we look at profitability. We look to achieve and maintain an EBITDA margin of 25%. And we've added this leverage target of a net debt to EBITDA below 2.5x. Now, of course, we have to add the caveat that there might be some changes if there are an M&A acquisition. But to be very clear, that's not on the horizon at this time. We have not had a dividend policy in terms of paying out dividends expectation, and we'll continue that expectation on a go-forward basis. And we're also enthused about adding our sustainability target, aligning with Sweden's national climate targets and global best practices by 2045. So good to have our new medium-term financial targets out in the market today. Now moving on to the rights issue, looking at the overview of it and also the use of proceeds. As I mentioned before, it's approximately 600 million SEC. In the bullets, you'll see some of the details about the practice and process of it. We'll have an EGM actually this Friday to approve. But in terms of use of funds, about two-thirds or 400 million SEC will be for the debt repayment to reduce our overall costs. cost of debt, which will free up capital in the long term and reduce our interest payments and provide the opportunity for us to innovate and invest in our SENT 2.0 strategy. And then one-third of the balance, 200 million SEC, will be explicitly to our balance sheet and focused on our financial flexibility and the opportunity to invest and execute our SENT 2.0 strategy for an overall size of 600 million SEC. We were excited about announcing the rights issue on January 27th, explicitly because we had 46% of our shareholder base already committed to the round. And now I'd like to pass it over to our financial guru here, Mr. Niels Boone, to go through our financial update.

Thank you, and good morning, everyone. As Patrick already said, it's no surprise here. We gave a training update on January 27th and the numbers are the same. We just provide a bit more context and details in this section here. As a reminder, this is the last time that we have to say that we changed the P&L format last year during 24. You see the three changes. So we have net revenues instead of gross. We move from a cost-based to a function-based P&L structure. And we introduce the EBIT-A measure as the main profitability measure. So every number that you see for last year is done in a pro forma way to reflect these changes as well. Starting with the sales on the left, you can see I'm kind of talking constant currency. We had a decline of 4.4% that was driven by, as already mentioned, partly the elections in the US in particular, but also overall weaker demand in the market. Still kind of the same picture as we have seen in the previous quarters. Gross profits, similar compared to the quarter before. It's a bit below last year, and that's also on the back of lower sales because there's also a fixed cost element in there. So as a percent, therefore, it's a bit lower, but overall in line with expectations. And then on the right, you see the EBITDA, 12.7 million. That's higher than last year, both in absolute as well as percent margin, which is, of course, driven by cost savings that we had during the year because we have lower sales, but still nonetheless higher profitability. So in particular, we had cost savings announced in December as well. That's partly reflected in here, but will come out even more during 2025. Then going into the splits of sales, you see media measurement was growing by 8% in constant currency. The index change was down by 10%. That's a similar picture that we have seen across the year, except for maybe that media measurements used to grow faster, but that's also what we already discussed due to Two things actually, Q4 last year being really high and also the elections ending in Q3 more or less, so therefore a lower percentage growth rate here, but nothing that is concerning us, so it's still in line with our expectations. And on the right, we have the split by region. So you see APAC growing by 10% in a constant currency, and then EMEA down by 6%, and the US down by 5%. So I think also that is a relatively similar picture from what we've seen before in other quarters. And moving on to the full P&L, I think most numbers here we already spoke about at the high level. So you see the 12.7 EBITDA again, 28% margin. Maybe looking a bit at the full year, that's also good to look at. Of course, you see that we have about 4 million higher EBITDA profitability. on lower sales so this is overall a good like performance and improvement in terms of profitability and something that we're focused on quite a lot and yeah one thing to mention also is the 1.1 million impact from the bad debt allowance or the bad debt provision. We have a more sophisticated method now implemented and that led to this change in there. So it was good to mention that as well. And there was a bit of revaluation impact of 600k. Going to Cash flow. This is, of course, the most important in the end, right? It's all about cash. So this is the key slide, I would say. For the quarter, it was plus 2.5 million compared to minus 2.7 last year. You could see that the operating cash flow was actually below last year, but then we compensated a bit on the working capital side, being less negative than last year and therefore overall cash flow positive. If you look at the full year, you see operating cash flow before working capital being about 11 million better than last year. And this is, of course, ultimately what's driving everything below as well. Something we're really keen on to improve even further this year in 2025, but it's looking good already for 2024. You see working capital with negative impact a bit smaller than last year, but of course that we are working on to turn around. You will see that on the next slide after this. Cash flow from investing that has to do with capitalization of R&D expense in particular. So investing into new features, new platform, et cetera, for the future. And the cash flow from financing activities, you see that's more than last year. That has to do with down payments on the loan. Overall, we closed the year with 26 million cash in the account. And then the final one around working capital. So here you see that working capital increased a little bit, also as a percent of customer spend, which is the way that we look at it, driven by accounts receivable in particular. So that one increased by about 16 million, 1.6. At the same time, accounts payable also increased by 10 million. So that's kind of in line with what we've seen throughout the year because many of the parties' clients who are on the accounts receivable side are also a supplier on our other side for about two-thirds roughly. So this tends to move in line with each other. And therefore, overall, working capital is kind of similar. So it's slightly up, but also we had a strong Q4, of course, coming into that number. So it's by definition the highest point of the year. Having said that, of course, we are still focused on getting accounts receivable down overall. And this is one of the most important goals for this year as well. If not the most important one, we have a couple of most important ones, but this is one of them. I think that's actually what I have to say here.

Perfect. Well, thank you, Nels. So the reporting on financial in line with what we already presented, so no major change there. Good to get some greater details on cash flow and accounts receivable as well. We're excited about the future of CENT, especially with our new strategy of CENT 2.0. We think it's critical, of course, that we have a strong rights issue over the next coming weeks, and so appreciate your support as we move forward with that. And it's a big gear for us as we focus on this working capital, cash flow, revenue, and our new 2.0 strategy and the ongoing migration and consolidation of our systems. So appreciate your time and support, and we'll move to Q&A at this time.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 5. The next question comes from Daniel Thorson from ABG Sundal Collier. Please go ahead.

Yes, thank you very much, Patrick and Niels. First comment here, you commented the man substantially fell after the US election in Q4. How should we think about the start to 2025? Has Q1 also seen this decline in demand in year-over-year terms?

Well obviously it's premature to talk about Q1. I would say in my experience the budgets for 2025 are set in late Q3, early Q4. So I wouldn't expect that the performance of Q4 to indicate anything about Q1, honestly. We've had scenarios in the past where Q4 has been radically large or radically smaller for various reasons and then Q1 starts the new year. So it's, we'll have to see exactly how Q4, sorry, Q1 is performing as we get to that earnings report. But I wouldn't correlate them necessarily.

Okay. Okay, I see. And then a second question here. Is it a reasonable target to reach a positive free cash flow in 2025 given your work with working capital but also less interest costs due to the rights issue that you will conduct?

That is a fantastic question. Niels, what do you think about that?

Yeah, so I would say so. So we have a couple of elements like you already say yourself as well, right? So we will have the debt reduction. That will help for the interest payments as well, reducing that. But also we will have a lower cost base already going into the year because we had the cost savings that we announced in July and also in December coming fully out now in 25. And also, we don't have the NRIs anymore from the integration that we still had half of the year last year. Yeah, so those things will help. And then on top, of course, working capital that we're working on, right, will help as well. So, yeah, all combined, that is all pushing in the positive direction there. But we don't guide with explicit numbers on this, right?

Yeah. Okay, that's helpful. And then just the final one here, the slide went a little bit faster than I could see, but on the cash flow side, it looked like you had a positive cash flow in 2024 in the full year, while in the report, it's clearly negative. Was I missing anything in there or was that the case?

You mean for the full year?

Yeah, for the full year. On the slide that you had, I think the number deviated from the report a bit. The net cash flow in the report was minus 12.9 million euros. while I think it was a positive number in the slide that you showed. Or maybe I was just wrong. It went fast.

It should be the same. I don't have the slide in front of me here, but for Q4, it was positive. In any case, maybe that is mixed with the full... Yeah, but for full year. For full year both, you mean. Okay. Yeah, I cannot comment on it like this, but... Let's skip it then.

We can take it afterwards.

Yeah, yeah. No, that's good.

Okay. Thank you very much. Thank you.

No problem. And our next call.

Victor.

The next question comes from Victor Hogberg from Danske Bank. Please go ahead.

Good morning. Two questions for me. On the media measurement organic growth, I heard what you said about the reasons for the deceleration in growth versus Q3. But do you have anything that is in your hands and able to or to be able to accelerate growth from the Q4 level within media measurement. And also, on the OPEC side, are you still planning for OPEC to be relatively flat in 2025 over 2024?

And so two questions there. One is about the relative expectations for ongoing growth within the media measurement business, given the slower growth in Q4. And secondarily, do we expect the kind of OPEX picture to remain the same in 2025? So I'll start with the second question. We don't expect to layer in incremental cost. We had a cost reduction in June and December of 24, and we expect to see those reduced costs maintain itself across 25.

It's the same guidance that we gave in December with the cost savings program that still holds.

That's exactly right. And then secondarily, on the media measurement side, we expect ongoing growth out of media measurement. I think the slower growth in Q4 was mainly driven by the outsized Q4 of 2023 that we're being compared to. What we see is ongoing growth and momentum within that business unit.

Any follow-up?

No follow-ups for me. Thank you.

Wonderful. Thanks, Victor. All right. So on to our next call.

The next question comes from Frederick Littell from Handelsbanken. Please go ahead.

Thank you. Good morning, Patrick. Good morning, Fredrik. Thank you for my questions. I think I have two. First one is really sort of a follow-up on the cash flow discussion 2025. I recall that in earlier years anyhow that you sort of, when you grow, you pay your sample partners first and then you get, you receive payments from your B2B clients. So that would imply that if your growth is coming back, you should sort of tie in working capital again. It's good to know. So I just want to see if that has changed, if you have renegotiated how that works. So that's the first question. And the second one is really on the exchange. If there's any fundamental change, you talk in the report about some lower volumes from key customers, have either the traditional inside companies like Kantar, have they changed how they work with digital samples? Or is it a sort of a Google phenomenon on the digital side? You know, just elaborate a little bit on how that specific market is developed and if you see any changes that you need to address. Thanks. I'll take that first question.

Yeah, I will take the first one on working capital. So I think overall, it's not that we changed a lot in terms of renegotiations compared to last year, because those processes are always taking time. And typically, the larger customers, they weigh the heaviest, right? And they have certain terms with us. It's more about actually sticking to them, I would say, and optimizing the processes around it so that it actually works more according to the terms. And as you can see in the numbers, we have some overdues, of course, right? So, when we look forward, the expectation is to reduce that part and then at the same time not build up new overdue. So, this is then helping in a positive way also to make cash flow wise next year. And yeah, I think that's actually the short answer to that.

Just to follow up, the short answer is that when you start to grow organically again, if we disregard the overdues and all that stuff, you will not really tie in cash into working capital when you grow organically.

Good, good.

Thank you. And then overall, we mentioned that demand has been soft, particularly from some larger customers. I think that's a reflection of the overall market. I think if you look at some of our peers that are also public, they've also mentioned softness and demand globally in research across the board. So it's really a reflection of overall market sentiment around use of research budgets in 2024, more than it's about the particular behavior of a couple of large customers that's different than the macro environment. Okay, that sounds great. Thank you. Thanks, Frederick.

Thank you. Next caller.

The next question comes from Thomas Nielsen from Nordea. Please go ahead. Thomas Nilsson-Nordia, your line is now unmuted. Please go ahead.

I guess we'll move on to our next question. Our next question is actually coming in to the chat. This is from Thor. Accounts receivable. Are you seeing signs that migrated customers are behaving better in terms of payment times?

How would you reflect on that?

Exactly. That's a good question, I would say. I think we should kind of disentangle the behavior from the platform that they're on. So the new platform will be better in terms of process, smoother and more efficient, let's say, in terms of the invoicing process. And therefore, I expect it to be better for everyone who's migrated, but it's not necessarily because of the behavior, but more because of the process that underlies that. Yeah, so the answer is yes, but not because of behavior, but because of the process that we have on the new platform being better. Would you agree?

I really like that question. I would say that it's early days in understanding the exact behavioral difference. But we have seen that the invoicing process on the Nusent Exchange is much more straightforward and elegant than what we've had in legacy systems in the past. So one would expect that as migration continues and as more projects are run and invoiced on the new platform, that there'd be more streamlined process.

Yeah. Wonderful. And Thomas has resurfaced now on chat. So Thomas, here was the question. With 75% of customers migrated to the Unified Synth Exchange by year end 2024, are you seeing any challenges from the remaining 25%? Are there any risks that full migration could take longer than H1 2025?

Great question. There are always risks and challenges, so to say there are none would be untrue. What we can say is that the remaining customers are in process in terms of the migration, but also we're in ongoing development and feature release for some of the key things that they require in order to be able to migrate fully by the end of June of 2025. We are on pace and in process. That's not to say it's without risk and without challenges and concerns, but right now we continue to see that we're on pace to have full migration from the legacy SIEM platforms by the end of June 2025.

Good deal. It looks like we have another caller coming in. Great. It's the same one.

The next question comes from Frederick Littell from Handelsbanken. Please go ahead.

Thank you. I just had a follow-up there on your description on the legacy platforms and all that. The full migration done by June 25. Behind that, when we reach into the second half of 25, is there a sort of a cost element that will disappear from the fact that you sort of can close down the old platform or platforms would be interesting.

That's a great question. We look at those costs in two forms. One would be, say, the cost of legacy platforms in terms of hosting, maintenance, and other aspects, and then also the R&D aspect of developing the new platform. And so we look to be able to deprecate legacy platforms as quickly as possible, and those hosting and maintenance costs would, of course, be a cost reduction in the back half of the year. On the R&D side, we look to convert our engineers' time away from maintenance or away from build of new platform into other innovative products that we've suggested in our Ascent 2.0 strategy.

All right. Clear. Thanks. Wonderful. As it stands right now, I do not believe we have any more questions. Give it a couple of seconds on the chat. But we look to be completed.

Fantastic. Well, thanks, Brett. And thanks, Niels. Again, we appreciate your time and attention today as we go through the Q4 results. We appreciate your support as well in terms of the rights issue that is underway right now. But most importantly, we look forward to the success in the execution of Sint-Tonpono over the next three years. So thanks again, and have a great day.

Thank you.

Thank you.