Vitec Software Group AB (publ)

Welcome to Vitek Software Group Q3 2025 Earnings Call. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Ol Backman and IR Patrick Franson. Please go ahead.

Thank you and a warm head of investor relations at Vitek Software Group and with me is our CEO, Olle Backman. In the call, we will first give a short overview of Vitek as always, followed by comments on the report we released earlier this morning. And after the presentation, we will open up for questions. So with that, I will hand over to you, Olle.

Thank you, Patrik, and welcome, everyone. OK, let's start off, as usual, with a short overview of the Vitek Group. By now you know this picture. The dots here represent where we have our feet on the ground, where we have our own offices, which is all in all in 12 different countries. But we have sales actually in over 50 countries by now. So that's a bit more. We sell our mission-critical software to nearly 26,000 business-to-business customers. Performa sales is up to 3.6 billion Swedish. And to my help, I have nearly 1,680 colleagues around the world. And it's us here, 46 business units, but as of October, we're actually 47 with the latest acquisitions. Moving over to show the diversification of sales, which is also a great strength of ours so that you can see that we are not dependent on any single country or any single customer or for that matter. So we have a great risk distribution in this and you can see also that the distribution throughout the markets is fairly even by now. And then talking about growth, how we work with that, we have our sort of dual engine. representing this so we are the business units that work with the market leaders in each of their markets usually a high percentage of recurring revenues so they develop this through our decentralized organization so that fuels the organic growth and then of course we have the acquired growth which is the acquisitions which we then fuel this with And looking at last year we did a record of seven acquisitions heavily in the last later part of the year. You can see that they come in all shapes and sizes and also in a variety of countries and we opened up a new market last year in Belgium. So far this year we have made two acquisitions, one in the Netherlands and also opening up a new country this year with Poland. Welcoming NMG here just after the quarter closed on early October. And sales by vertical. That is another way of looking at this. So we have nearly 46 business units, but we operate through 22 different verticals. And you can see the bubbles here are the sizes in terms of volume there. So property management, energy, healthcare, auto and finance are the biggest ones. We also show a picture of the various business units with the LTM numbers on the sales and also the share of the recurring revenue part. And you can see here also, this is the distribution here, some bigger, some a bit smaller. And that is basically also how our M&A market looks like. So by now we take with all our 47 business units, it's a blueprint of the market. And when we work with these business units, one of the great strengths of belonging to a group is the sharing of knowledge across the group. So we have a common culture. We have a sharing concept, which we call where we have forums. We have, I think, nearly 12 different forums where we have our best practice sharing. And this is a very powerful tool because all of these 40 students, seven business units, although they operate in different markets, they are very much alike when it comes to business models, when it comes to technology, when it comes to utilizing technology and different types of tools, of course, AI tools for that matter. So within these sharing forums, we have a great opportunity to cross fertilize good ideas to come. And just a short note on AI, I thought I'd mentioned that I wrote about it also in the report here. We have different ways of looking at this more from an internal perspective, of course, improving our ways of working, efficiency, quality, risk mitigation for that matter. And then on the right hand side, we have a growth perspective, which is the more external perspective where we embed AI functionality in our applications, which we sell to our customers. That gives both us and the customers a competitive advantage. It gives us great scalability and also new revenue streams to come with that. Below there, we have some examples from some of the business units. From the internal perspective, a lot of it is around both efficiency in coding, of course, with the tools, but also in customer success and customer support. And the same goes for the external perspective when we have our customer applications, which, for instance, in VTech Energy, the AI models that we use for energy forecasting, which we sell to our customers in the real estate agents business, we have a powerful tool there to help the real estate agents being more efficient in their daily work. And also in APFA, which is in the elderly care, where we help our customers to automate some of the regulatory data that they need to report and adhere to. And these are just some of the many, many examples that we have across the room. But also, like I mentioned in the report, this is more of an ongoing evolution. This is something that we have been doing for a long time and with every new technology shift we use it of course and see how we can work with it and to our advantage and also to the advantage of our customers. Then moving over to the third quarter report, we have the highlights here. Total sales, net sales was up 6%, 10% on the full year for the first nine months. Recurring revenue share is very high as always, 90% here. Our EBITDA was slightly down 5%. But the cash EBIT, which is something that we've been talking in these conf calls throughout the year, so that's an EBIT margin net of any capitalization or amortization. So it's very close to the cash generating and that's also the internal net. KPI metric that we use with our business units that was up 10% so of course the difference is there that we write off some of the intangibles quite heavily so that's the difference between the EBITDA and the cash EBIT so cash EBIT is really the day-to-day operations and how that is tagging along so 10% up there for the quarter 5% on the total And also something I wrote in the report there this quarter, again, we have an OVA, our Dutch business unit, which was down nearly 50 million compared to the same quarter last year and with a gross margin loss thereof. 11 million compared to the last year. That's something we also wrote about in the Q2 report where the numbers were even greater. So it's sort of going in the right direction in that sense. And we also have done a lot of measures in the product development And also in the business development there to mitigate the ups and the downs there. But we are exposed there to the market conditions of the balancing market. But nevertheless, Enova is still doing great from a business unit perspective. But they also operate in quite a volatile market. But we will get back to that. Cash flow. quite according to plan and according to the seasonality pattern that we've seen throughout the years. You must remember, we basically have all our cash flows in the first quarter, which is a great thing with this recurring revenue models. So we generate all the cash in Q1 and then we are basically quite flattish throughout the rest of the year. So this is totally in line with expectations. And if you see the, you should really look at the nine 60 million roughly from operations. Net sales, we talked about that, roughly up 6%, like I mentioned, for the quarter. The EBITDA result is by margin a bit sequentially up, but compared to last year, it's slightly down by 5%. And the cash EBIT, which I mentioned earlier, there you can see also the sequential improvements throughout the year from Q1 to Q2 now to Q3. But of course, compared to last year, we're also up with 10%, like I mentioned, for the quarter, which is quite good in this macro environment. And despite that, we had that 11%. million less of a gross margin from Innova than we had last year. So overall, fairly happy with the development from the Kanshibit perspective, dragging along quite nicely. I also mentioned in the report there that we did a bit of a reminder of that last year was an exceptionally strong Q4 with the both the five acquisitions that came in in Q2 and Q4 which also of course contributed highly to the the growth But also the fact that we had a great tailwind from a better general economy. And we had three large hospital projects which finalized. They were three year long projects which came through last year. So you can see that if you look in the Q4 report for last year, you can see very high numbers on license, other sales and services for that quarter. Like I wrote in the report, we have a stable environment today. Nothing really is happening, not on the upside, but also not on the downside. So we are expecting a bit of a more flattish development in that sense for Q4. And by flattish, I mean compared to where we are at this point. So it's not flat against last year, which was all in all a huge record quarter. Then moving on to something new, we from this report start to report on the quarterly basis, the organic and the inorganic growth. There are lots of more numbers in the actual report, but in this presentation I just highlighted here the subscription part, which is the absolute bulk and the SAAS fees and the maintenance fees. They were up 6% during the quarter organically, whereas the transaction-based was down 20%. This is of course the 50 million which I refer to for Innova is behind that loss. So I hope that you will be able to dig into these details. I still think that Vitek is a really long term company. You should really look at the LTM numbers and the long term perspective of everything we do. But of course, there are quarterly things to look at. So just summing up, steady operational improvements for the quarter. Enova still a bit of a soft market there, but they are doing quite okay from a profit perspective. And in October, of course, we added the acquisition of NGM, which we were very happy with and look forward to reporting them in the Q4. So with that, I will hand over to the question and answer session.