Vitec Software Group AB (publ)

Thank you and very welcome to this Q1 2025 presentation for VTech. I am Olle Backman, the CEO, and you will have to do with me because Patrick is not available at the moment. But as always, I would like to start with a general presentation of the group and starting with the big pictures here. Customer perspective, we always start with that. We have nearly 26,000 customers that we serve all business to business. We do that out of today, 46 different business units, business unit, basically a company. We have our feet on the ground in 12 countries, but we actually have sales in over 50 countries today, all in all. But you should also remember that most of our business units are a very domestic business or regional at best. Proforma sales, which is a bit of a guidance since we do lots of acquisitions, is up to 3.7 billion Swedish after Q1. 88% of that was Proforma recurring revenues and to my assistance I have nearly 1,660 colleagues. You can see the sales distribution there by market. It's quite evenly distributed between the origin of E-Tech from the Nordic countries and then spreading further out into Europe with our footprint in the Benelux area. Our strategy chain, which we work with throughout the group, it's always based on our values. That is the products of the foundation. It's very important to remember that we are a product-based company. We like to keep things simple. That's more to do with efficiency and how can we improve? How can we make this in a more efficient way? So it's a mindset. And then, of course, trust and transparency that works best. towards our customers, towards the society as a whole, and always, of course, internally, because it's a great value for us to be able to share knowledge between the different business units. Then we work further into the brand promise, which is to rely on today and tomorrow, especially important in these times, perhaps, that we are a very stable company that has been here for a long time, and we really care about our long-term customer relations and then working through the business concept and objective and then hopefully then also reaching towards our vision which is to to shape a wiser and more sustainable future um and talking about that future and and the growth that goes with it we have a way of trying to describe how we grow Of course, the business model, as I mentioned, all our business units are market leaders. They have a high percentage of recurring revenues and they work with that business model. We develop these business units from a decentralized perspective. So we are a very flat organization. We make a lot of efforts into the product investments, which is very important for us in order to be that trusted company in the future. And all of this fuels the organic growth of the business units. And then we top that up with acquisitions. And then basically we look for nice vertical market software companies, established and profitable. They have a proprietary software, which means that they own their own product roadmap. And of course, they already have a decent amount of recurring revenue. So basically the characteristics of VTech itself is what we look for in new acquisitions. Talking about acquisitions, this was the seven that we did last year, and I'm not going to run through all of them, but the point here is that they come in all shapes and sizes, and they're also in a very spread out geography. Really interesting here for us internally. Of course, we opened up a new home market with our first acquisition in Belgium last year. So far this year, we acquired the Dutch company Integrip in January. A really nice addition. Also a great proof of a company that does not only have a mission-critical software for its customers, but also software that is critical to society as a whole. That was a really nice addition. If you look at it... By vertical, we perhaps could cluster them together. So we have our big footprint here in the energy field, in property management, healthcare, auto, finance, and so forth. So sometimes we buy companies that sort of jack into one of these existing verticals, or we could buy a company in a totally new vertical. And this is another way in which we show our business units. You can see here the sizes and the proportion of recurring revenue and also the year of acquisition. And this is pretty much like a blueprint of the M&A market as we see it in our existing geographies. The average size is roughly four or five million euro company, some bigger, perhaps one out of 10 or so. So that's pretty much what it looks like when we look into our pipeline as well. Organization, like I mentioned, it's a very flat organization. So in these blue boxes, that's where the business units are. That's where all the business decisions are taken locally. That's where it all happens. And to their aid, they have the VPOs, which is a vice president of operations. So they are part of the group management team, but they work exclusively with these business units so they don't have anything else on their plate they just work to coach them to guide them to make them a bit better year by year and then we have a small group office at the headquarters supporting the business units one of the things that we do drive centrally is this sharing of knowledge which is a very important part because when you have 46 companies that are basically doing the same thing, which is vertical market software, although directed at different industries. It's a very important thing that we can share our common culture, but we can also share concepts, best practices and worst practices for that matter as well. So we share both successes and failures. And this just keeps on getting better with size. So it's a very powerful thing within the VTEC group that really helps us to become better. Moving over to the numbers for the quarter then. Net sales was up 23%, up to 880 million. The recurring revenue part increased by 28%. EBITDA margin at 220. Margin-wise percentage unchanged or unchanged in absolute terms. The margin decreased to 25%. dropped from 31 operating profit which was 153 million same there unchanged but the operating margin at 17 compared to 221 last year reason for this is basically a bit of a mix in the revenues so we had a Less services and less license sales, although they are a quite small part of our total business, but they are 100% margin business because we have all the resources already at our payroll. We thought we saw some increase in the activity in the market in the end of last year. We were hoping that to come through in Q1. Unfortunately, it hasn't done so. So the turmoil around us has sort of postponed some of the rollouts of new projects, rollouts of new features and things like that. So that's still the picture that we see. We don't experience that we have actually lost anything, either customers nor businesses. It's just a lot of postponements of new initiatives. And although at a quite small scale, because we have this really stable business model with the recurring revenue, it's still sort of the cherry on top there that also falls through in the marketplace. But if we look at the operational result, I will get back to that shortly. It's still an okay quarter, not our best, but okay. And if you look at it by quarter or the yearly, so the graph here is just an expression of that. You have read that through the numbers, I think. Compounded growth over the past 10 years is 21%. If you look at the EBITDA margin, same here, we are increasing in absolute terms year by year. But if you see the margin on the last few quarters, it has dropped a bit down to the 25 for this quarter. And talking about what I mentioned here, which is sort of the cash generating profit, this is one way that we measure internally because we don't do the activations and the amortizations and things like that on a business unit level. So when we coach and guide our business units and set their targets we use an internal KPI which is basically a cash EBIT. So this is just a bridge for you to understand the 153 million which we reported if you deduct the capitalization and you add back the amortization and the acquisition related amortizations you get to the cash EBIT which actually then increased With 12% and the margin is 20 compared to 22. And this is also stems very well with the actual cash generating. So the cash flow was up, I think 9% this quarter. Look at the distribution here. You can see the very important thing that the subscription based revenue is growing healthy underneath. And then we have the transaction based revenues on top, which is a great value add for our customers. But as I mentioned before, they have a very different gross margin profile. So it's a lot less profit in that dark blue part of the portfolio. But all in all, a very good offering for our customers and very appreciated, which makes us take a greater share of the wallet. So growth then, as I mentioned, one acquisition so far this year. And then if you look at the organic pro forma, which is what we have been guiding for now for a couple of years. So that's one quarter in this year and of course, three quarters in the last year. So we are expecting that to go down a bit because we have still some tailwind from the higher inflation year of last year. So the price increases there are... expected to go down a bit in this year. If you look at it in a more traditional way, we measure this on a full year basis. So this was last year's numbers. So then we had an organic growth of 9% in comparison. The diversification of sales, as I mentioned, through the geographies, it's quite an even spread, but also a very nice diversification when it comes to breaking down the recurring revenue, of course, and also on the customer side. So we have a very low customer dependency. And then that is just to sum it up a bit. Like I said, nice growth. one acquisition so far this year and the cash flow from the operating activities was pretty much in line with what we expected. And with that, I think that we will hand over for any questions.

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 Predrag Savinovic from Carnegie. Please go ahead.

Good morning, Ola, and thanks for taking my questions. I think first off, how much should we read into the comment around the mix shift? Is this an isolated event for the quarter, or this is something that we will see more of during 2025?