Vitec Software Group AB (publ)

Thank you, operator, and a warm welcome to everyone on this call where we will cover the year-end report for 2023 that we released early this morning. I'm Patrik Fransson, Head of Investor Relations at Vitek Software Group, and joining me in this room is our CEO, Olle Backman. To begin, we will provide a brief overview of Vitek and then followed by our insights on the fourth quarter and the entire fiscal year of 2023. Following the presentation, we will open up the floor for questions. So with that, I hand over to Jone.

Thank you, Patrik. And good morning, everyone. I will start up with a quick overview of VTech today. We always start with the customer perspective that we serve nearly 25,000 customers out of our nowadays 41 business units, 40 here, but we have already, as you have seen, acquired another one earlier on this year, LDC in the Netherlands. To these customers, we have accumulated sales on a pro forma basis of nearly 3 billion Swedish kronor run rate today, out of which 84% is recurring revenue, which we are very proud of. And I have nearly 1,500 colleagues based out of 11 countries, but we have our five home markets, which are the dominant ones, which is the four Nordic countries plus the Netherlands. And you can see also the geographical distribution here with an emphasis on these home markets. To start off, we have our strategy chain, which we call it, that will guide us. And goes from vision all the way back to the values and also my personal favorite here is the brand promise, which says all about Vitek and our long term ambitions, which is to rely on today and tomorrow. We strongly believe in focus, and for this matter, we have condensed our work and structured our work into four different segments here, focus areas, which we call them, which will guide us through this presentation as well. Responsible growth, enabling products, empowered people, and reducing footprint. And starting up with responsible growth, we have a business model in which we strive for having a high percentage of recurring revenue. And we are also usually the market leader in our respective niches. And we work with our business units, which is the develop phase. So we develop our organization, we develop our products. And this is where we also have our organic growth coming from. And then to top that up, of course, we have acquisitions where we, from a very stable set of criteria, acquire nice vertical software companies, which are established, profitable. They have their own proprietary software and they all have a decent amount of recurring revenue. That's what we look for. This is a picture of basically the market as we see it today because by the size that we take is today we are a mirror image of the market so usually small medium-sized businesses but every now and then something a bit bigger pops up like it did this year 2023 when we were able to acquire dutch anova which was a bit bigger than usual Talking about acquisition, last year's record amount of six acquisitions. You can see within two in the Netherlands, two in Sweden and two in Finland. This is a range from small bolt-ons like DL and entry events, really small ones, but they were bolt-ons to existing business units up to bigger Enova, like I said, nearly 300 million Swedish kronor. And excellent start of this year, also adding Dutch LDC just last week to the family. It's a really nice addition for a nice vertical software company. Moving over to what we call enabling products and how we structure that. We think that we take place an important part in society as a whole. And as you can see, this is a picture of all our business units and the verticals that we operate in. 20 or so, but now than 21, when we add LDC to it, they can see we have many business units in some verticals and few in others. But they are not. deliberate strategy of finding synergies but the more of the same that we look for nice vertical software companies that meet our criteria and then if they are in a new vertical or an existing one to that we are quite agnostic a more traditional picture perhaps of the organization and how we're structured and this is also how we're able to grow So as you know, all the action is in the business units, the red square at the bottom, they are autonomous units. They have their own resources for development, sales, operation, customer support, products, marketing, et cetera. And then to aid them and to guide them and to challenge them and also to share common experiences, we have the VPOs, which is a very important person in our management team. And this is how we can scale it. So more business units, we add another VPO, roughly seven to eight business units per VPO. So we just added another one actually starting today. So it will be another phase on this picture coming up the next time. Then, of course, we have our headquarters with support functions for the business units if they want to. One important thing in our culture is about sharing. And what we mean by sharing is that both we have a common culture, we also have sharing concepts, which is forums for best practice sharing. It can be anything from product development, coding, it could be marketing, it could be finance, it could be sales, it could be customer support. And this is... the really highly appreciated form for all the business units, because they are quite autonomous and being autonomous is also being a bit alone in your thoughts and what to try to do. And in these sharing forums, we're able to to head up with peers thinking about the same problems as they have. So this is a great concept for us. And of course, lastly, we have a reduced footprint focus area. And of course, we both help our customers through our softwares. But of course, we also look how we can get better at our environmental profile ourselves. So we have quite ambitious targets for this to reduce our carbon dioxide emissions. emissions by 75 up to 2030 and we are on the way to that target then moving over to some of the numbers here so you can see here we start up with sales compounded growth is as you have seen over the years nearly 20 year on the air but this year was an exception on 40 percent of course A lot of it is due to the fact that we were able to acquire Innova, which is a bit bigger than usual, but also solid organic growth to support that. And if you see on the quarter, it was an increase by 28% up to 740 million. And like I mentioned earlier, pro forma basis, we're up to 2.9, nearly 3 billion in sales. And more importantly, of course, is the profit level. So our EBITDA increased with over 50%. And as you know, we always strive to increase our margins with a higher number than we do our sales. And this was true for this year and for the quarter as well. So we increased on the quarterly basis our EBITDA with 31% up to 224 million. And the EBITDA margin year to date is up to 32 percent. Talking about growth, this is a bit new. We were trying to guide a bit on the last three years. So we have our organic growth in our recurring revenue because this is sort of the key in our business model. And this is a lot of what we communicate both internally and externally. And as you can see, we had a healthy increase here of 14 percent on a total for the recurring revenue, out of which 10 is the net effect if you take out the FX. So 4 percent and FX tailwind, both in our recurring revenue and in our total net sales. Total net sales was up to 10 percent, including FX and then six. if you exclude the FX effect. And looking into diversification of sales, this is a very strong position for us. So we have a great diversification. You can see, of course, across the geographies there with our five home markets, and then you have rest of Europe and the rest of the world on 7%, and then US on 5%. Like we mentioned earlier, nearly 85% of it is recurring, which we are very proud of. And then on the customer distribution, all these nearly 25,000 customers, the top 10 of the software customers only stands for 8%. And this gives us, of course, stability, but also very good risk distributions. And then to sum things up, we have been doing this for quite some years. Next year, we have our 40th anniversary. We were founded back in 1985. And I think we have a good record of showing a sustainable profit growth empowered by these recurring revenues, both organically and inorganic. And you can see the bullet points here just as a sum up of the of the year. And of course, last but not least, we're very proud for the 27 consecutive year that the board will propose to the AGM for an increase in dividend up to 3 kronor per share. So with that, I think we will open up the floor for questions.

Thank you. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Eric Larson from SEB. Please go ahead.