Exsitec Holding AB (publ)

Welcome to this year-end report for 2024 for Excitec. Presenting will be CEO Johan Kallblad. And without further ado, I will leave the word to Johan.

Thank you, Hampus. So we are going to go through financial results of 2024 for Excitec. I expect this presentation to last around 15 minutes. It's possible to ask questions via the hand raise function or the chat function in Zoom. So... I'm on my 15th year as CEO of Excitec, and one big piece of news on a personal level for me is that I will be transitioning into a role on the board of Excitec and handing over the CEO duties to Niklas Ejek in the start of March 25, so it's only a month out. Niklas has been a colleague of mine for about 10 years, reporting directly to me in the role as a business unit director of our largest business unit, ERP Sweden, for the last four years. Also new in his role is Carl Arneson, who's joined us as a CFO earlier this year with a background from several entrepreneurial growth-focused organizations. And both Carl and Niklas are here with me in the call and we'll be able to answer questions relating to them. So as usual, I'll start off by making a short recap about our business to remind everybody of what it is that we do. And after that, we'll cover Q4 financials and a short market update. And then Niklas will talk a little bit about our priorities for 2025. So starting off with Excitec, we exist to help medium-sized businesses in the Nordics use digital tools to improve their operations. And we strive to be a one-stop shop for the customer so they can focus on their core business and leave the business side of IT to us. digital tools, things that can address areas like reducing financial administration through automation or using data for better decision making and sometimes creating integrations and information flow between the business applications used in an organization. Like I mentioned, I've had the pleasure of overseeing this operation since 2010, which has been a very consistent growth story. And we did manage to produce some growth also in the challenging year of 2024. I'll get back to that later. Geographical expansion has also been a priority over the years, growing out from one office in Linköping in Sweden to around 20 offices covering Sweden, Norway, Denmark and Finland. So looking at our target market, that is medium to large size companies in the Nordics. Our customer base today is around 5000 organizations. No one customer typically is more than around 1% of our revenue. So it's quite a low risk in the individual accounts. We combine the software packages that we work with to fit different industries. And we have customers in most every industry sector, at least the ones where there is a large amount of medium-sized to large-sized enterprises that need digital tools. So we are resellers of a selection of software components. And the selection has grown to just over 20 software components at this time. We combine these resold software components with integrations that we develop in-house. And these are the primary software providers at this time. We have a revenue share partnership with these software providers where we market and sell their software to new accounts and we make customers successful in using the software over time. Dream customer of ours could use up to five to six different components from us. Our average customer today is a bit over two. So there's a lot of work remaining in growing our footprint on existing customers. And lastly, about us is a picture showing our business model. It's built on three revenue streams. Sales and marketing is focused on selling software to our target market together with these integrations that we develop in-house. This is sold on a subscription model where you pay as you use. And this revenue stream has grown to around 23% of our net revenue for 2024. Still around or just under two thirds of our revenue is from professional services where we implement the software and we make the customer successful in using the software over time. We also do custom development and custom integrations where needed. And the third revenue stream in our business model is that we offer the customers a single point of contact support on a recurring fixed price model. And in this engagement, we can also take care of infrastructure, hosting, internet access, IT security and such things that's needed for the ongoing use of the software products. so time to get into the year that's passed from a financial perspective and also a little bit about the market conditions in general so on the business sentiment in general we've seen a cautious market all year in actually in all our markets with the customers pushing out investments It seems like it's especially the small tasks that are being pushed out, probably the things that are perceived as operational rather than strategic. This actually all in all adds up to quite a large volume for us. And due to this, we have a lower resource utilization in our professional services than what we planned for in the quarter and actually for most of the year. It does, however, seem like the big initiatives are picking up, and we see record strong sales numbers in terms of our order intake for Q4, especially around our new cloud conversion offerings, but also around data analysis and e-commerce. Actually, that's been a weak spot for us throughout the year. So we have an order intake that's more than 50% higher than that of Q4 of 2023, and it's 30% higher this year. than the previous record, which was actually in a Q2 of 23. So what should I say? It's difficult and cautious out there, but there are deals to be made. So we would feel really good about having a couple of more quarters of strong sales numbers. Then we'll start to feel really good about things. Going to the numbers, we did create some growth through our M&A activities. So overall growth of 77% in the quarter, reaching 227 million SEC revenue. It's the highest revenue in a quarter to date for Excitec. The organic growth, however, was minus 5% in the quarter, challenging environments. We should... Note that the revenue numbers and in particular Evita in Q4 of 2023 was a bit higher than normal due to some effects from some software partnerships. We have had an unusually high margin in the quarter. We mentioned that to some extent in the Q4 report from last year. But in either case, not a good quarter from the organic growth perspective. It's entirely the professional services that has been weak. Software revenues have recorded strong growth all year. For the full year, we report a total growth of 8% to 811 million SEC in net revenue with slightly negative organic growth, organic growth around negative 1%. Just the debita in the quarter, 30 million SEC. It's lower than the 45 million we had a year before. Not a great performance, actually still our second best Q4 to date. Like I mentioned, the 45 million SEC from last year was affected by some positive one-off effects from some of our product vendors and a very favorable product mix that we also mentioned in the year-end report from 2023. But no matter how you put it, the 30 million SEC from Q4 of 2024 was clearly a worse performance than the year before, even taking this into account. So the main reason for the negative development in EBITDA was a lack of volume in the professional services in a passive market. The increased trainee program and our sales talent program that we announced in August also affected EBITDA relative to 2023 with around 4 million SEC in the quarter. This is an investment that's intended to yield results in the second half of 2025 and onwards, assuming that the market is gradually heating up. So this additional cost is not actually the main reason for the weaker results, but it certainly doesn't help. So for the full year, we end up with an adjusted EBITDA of 121 million SEC for a margin of 15%. Moving into the segments, Sweden, a bit underwhelming compared to historical performance, 17% margins. And it was in Sweden that we had the majority of the costs for new employees. There were some one-off effects related to M&A activities. We think the normalized numbers are a little bit better than the actuals. So to elaborate on that, some efficiencies when you try to bring on 150 new customers and And 30, 40 new employees doesn't yield all business focus in the operation. So we should be doing a little bit better, I think, normally in this business unit. But Norway saw some improvements, actually, with a strong demand for the new business next offering. Still lower efficiency levels than in Sweden. It looks like we are on the right track again. Denmark and Finland starting to look better after the acquisition of the Visma Business customer base we announced in the quarter. That's gotten off to a good start and should provide a growth opportunity for the coming year. So for the entire year and a few years back, the net recurring revenue from software has been a highlight for us. For the entire year, we see a growth of 32% in this revenue stream, and it made up 23% of revenue for 2024. The growth is driven both through M&A and through new sales and cross sales and to a slowing degree of price increases that was a bigger driver a year or two ago. This is an important contributor to our earnings. It's also good measurement to see that we have a strong offering and customers using and deploying software that we and keep on using software that we delivered to them. Last thing on the quarter, we completed two M&A deals in the quarter. We used the debt arrangement that we informed about earlier this year, so minimal dilution for shareholders. We acquired a business unit from ECIT consisting of over 100 customers using the Visma Business ERP platform in Denmark. When merging this with our existing business, we become the clear market leader in this niche segment on the local market. We also acquired Brightcom Solutions in Sweden. They are specialized in ERP based on Microsoft Business Central, especially for e-commerce and retail operations. Some onboarding costs and inefficiencies in the quarter, bringing on a total of 250 customers and more than 40 new colleagues. But we feel really good about this addition to our business. And then to round up the financial, the board of directors proposes a dividend of 175 SEC per share for 2024, which amounts to a total dividend of approximately 24 million SEC. This is around 40% of our earnings after tax, which is in line with our ambition to distribute up to 40%. And it's the same dividend as last year. And this concludes my presentation, and I will hand over to Niklas, who will mention some about our priorities for 2025. Welcome, Niklas.

Thank you, Johan. And hello, everyone. This is Niklas Ek talking. I am the new CEO from the beginning of March. So these are business priorities for 2025, where the first one is sales execution. We increased our sales force in 2024 to be ready for 2025. And as Johan mentioned, we are coming from a strong quarter with record order intake and our offering is better than ever going into 2025. So a clear priority for us is to increase our sales to be able to get back to organic growth. The second one is about operational excellence. Our employee turnover has decreased significantly during the year and our total turnover rate is now lower than historical average. At the same time, we have been running a record large trainee and sales program. So this combined has strengthened our delivery capacity and will ensure our overall capacity when the market rebounds. However, at the beginning of 2025, we reviewed areas where we had excess capacity and did not have great sales numbers and made certain adjustments to improve efficiency. We will continue to work with operational excellence and higher efficiency in 2025 to increase our earnings. In the last quarter, as mentioned, we acquired Brightcom in Sweden and a business unit from ECIT in Denmark. So an important task for us in 2025 is to integrate these into Excitec as smoothly and quickly as possible to keep focus on the customers. Even though we completed these two acquisitions in the fourth quarter, we will continue to work with M&A and keep looking for selective acquisitions when we have the opportunity. So this concludes the presentation. Are there any questions for us?