Vitec Software Group AB (publ)

Thank you, operator, and a warm welcome to everyone on this call where we will cover the Q1 report of 2024. My name is Patrik Fransson, Head of Investor Relations at Vitek Software Group, and with me in this room is our CEO, Olle Backman. We will again start with a brief overview of Vitek and then followed by an update of Q1. And as always, after the presentation, we will open up for questions. So with that, I hand over to Joel.

Thank you, Patrick, and a warm welcome to this presentation. And as always, I will start up with a broad picture here. Those of you who have seen it before, not much change, but that's part of the point. What has changed, of course, is that we are now 41 business units and the pro forma sales is close to 3 billion and we're approximately 1500 employees. other than that it's fairly stable and if you look at our five home markets the four nordic countries and the netherlands you can see the sales distribution is by quarter by quarter becoming more and more even basically and that's also a good thing and Then just moving on, no changes here either, but it is very important to keep in mind how we work and with the strategy and the strategy chain. And you can read this from left to right to right or the other way around, starting with the values or starting with the vision. But I prefer to start with the values because that is sort of the foundation of the company. And here it's very clear that we are a product company. That's our foundation. We try to keep things simple, but as always, we don't mistake simple for being sloppy. It's really hard doing simple things, but it's just a mindset of trying to do things in the most efficient way. And then, of course, trust and transparency. And the bigger the group becomes, and I wrote that also in the Q1 comment, it's very important that we share knowledge and share best practices within the group but that really makes us grow makes us more efficient so that's a very valuable part of this and then of course the brand promise to rely on today and tomorrow and that's basically what we do we invest today in our products and in our people in order to be relevant tomorrow and have a clear communication with that to our customers makes us not only their choice for the future but They stick with us, and that's also a very important part of what we do and how we do it. Then moving over to our focus areas, which we have, this is the way we have chosen to work with sustainability. This is also nothing new. We have four focus areas, responsible growth, which is basically taking care of existing customers, our brand, and how we work together. We have, of course, our enabling products. which is by far the biggest impact that we can have on society. But most of that impact is with our customers. So we facilitate them, we help them through our softwares. Then of course, Empowered People, our staff doing all the work and the fantastic efforts there. And of course, we reduce our own footprint where we can and then so forth. Moving over just to that, responsible growth touching on that a bit and it's all in developing the business units that we have. We do that through our decentralized organizations, product investments and solid focus on organic growth. To help us there is of course our business model where we have a high percentage of recurring revenue, which is something we strive for. We're usually also the market leader in our respective niches. And then, of course, we add acquisitions on top of this. And here we have the same set of criteria that we look for in each company. They should be, of course, be vertical and well established, profitable. They have their proprietary software, which means that we are in total control over the product development and a decent amount of recurring revenue. And this has been very consistent over the years. then one way of looking at the entire group is of course by vertical here it's a bit of a new picture we must try to highlight the great variety within the group and which makes us a very sort of stable and company so that we are not dependent on any sub-segment or vertical especially some are bigger some are a bit smaller you can see property management energy health care Very stable verticals that we have been active in for many, many years. And then you have others popping up with acquisitions coming along. But all in all, we are more than, I think, 20 plus different verticals distributed across these 41 business units. And of course, looking at the business units of today, this is a picture that you also recognize. In which country, when we bought them, the annual sales numbers for last year and the recurring revenue portion there. And here you can see it's everything from 46 to 100% in recurring revenue model. Talking about acquisitions, of course, this year we started in January with the acquisitions of Dutch LDC, the software that helps in labor mobility in the Netherlands, career coaching, matching of candidates and vacancies and trainings and so forth. A really nice, nice addition that has all the characteristics of a nice software company that we like. a bit on the small side but nevertheless very good addition and just a few more this is last year's six acquisitions that we did and here you can also see the range between smaller like entry event and deal systems which are actually add-ons to an existing business unit that we have and then me again kodea memorix and innova are all standalone businesses You can also see that it was both in Sweden, Finland and the Netherlands for last year. Organization wise we look pretty much the same. We have our very important strategy here with the autonomous business units there in the bottom of course and then they are doing all the work and that's the foundation of the company. To their aid they have the very important VPOs which is like a working chairman of the board, helping, coaching, but also challenging them to become a little bit better each year. And then, of course, we have group functions that support this. And one of these support functions is all about sharing, like I mentioned earlier, that this is something that has grown over the years, and we have now a very good platform on how to share this common culture with sharing concepts and forums for best practice. And it could be anything from development, it could be marketing, it could be finance, it could be product development. Basically, everything that is of interest. Of course, today, UX, AI forums and such like, they're We challenge each other, we share good practices, best practices, but also, of course, mistakes that have been made in order for everyone to be able to become a bit better. And finally, of course, we have our own footprint that we try to take care of. We have a target to be reduce our carbon emissions by 75% to 2030. And we are on the path in that direction, moving along nicely. Of course, we have a huge downfall in the pandemic, but we have sort of been able to sustain that level even if we grow a lot. So this is something that we work with continuously during the year. Then moving over to the interim report, some numbers. for you. Look at sales by quarter. Pretty solid. What we saw 17 percent in total. And if you look at the subscription based part, we grew 10 percent in local currencies, which is a good number. Services and licenses are a bit lower, especially if you compare to Q4. But there is a bit of a seasonality effect as well. And an effect, like I mentioned in the report, that it has during 2023 been a bit slow in the new sales in certain verticals. And of course, that affects license and service revenue a bit. But of course, looking at the profit levels, margins really good, 31% EBITDA compared to 30. And then keeping up that pace is really important for us. EBIT margins, which is a bit lower down, follow the same pattern. Basically, we have 21% compared to 20. And then, of course, really, really good cash flow for the quarter as it should be. But we had 42% growth in cash flow, which was really strong. Of course, that cash flow also has an impact on our financials. And so the net debt to EBITDA came down from 1.8 at the year end down to just below 1.4. Talking about that organic growth, which I mentioned a bit before, you can see two charts here. One is the organic growth in subscription-based recurring revenues. And this is really the big foundation of VTech that gives us this stability. And like I said, 13%, 10% if you take out the currency or FX effect. On total sales, the equivalent numbers was 9% growth or 6% if you take out the currency effect. And this is on rolling 12 months basis because we think that's an appropriate way of measuring such a stable business like ours, where we usually send invoices a year ahead or quarterly ahead or something like that. increase prices once a year, perhaps. So I think rolling 12 months is a good way of measuring how the company is developing. And of course, diversification of sales, like I mentioned, this gives us a great both stability and the low risk you have between the countries there. You also have the bigger recurring revenue of 86 percent and of course, also the customer distribution. So no big, single big customers. The top 10 only accounts for 7% of the subscription-based revenues. And all in all, we have nearly 25,000 customers. And that's just rounding off some highlights there. Well, like we said, solid quarter in terms of growth. in sales and of course the annual recurring revenue part is up to 2.5 total sales. Like I mentioned earlier, 2.9 billion on a rolling 12 months basis. EBITDA for the quarter up 19%, margin up one percentage point to 31 and strong cash flows. So all in all, pretty solid. Quarter total in line with what our own internal expectations were So with that we sort of round off the presentation and open up for questions 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 6 on your telephone keypad. The next question comes from Erik Larsson from SEB. Please go ahead.