Vitec Software Group AB (publ)

Welcome to this conference call. I'm Patrik Fransson, Head of Investor Relations at Vitek Software Group. And with me in the room is our CEO, Olle Backman. As always, we will first give you a short overview of Vitek and then follow by comments on the report released early this morning. And after that, we will open up for any questions. So, Olle.

Okay, thank you, Patrick. And again, sorry, obviously not a VTech software that was used for this. But like Patrick said, always starting with a short intro on the group level and then moving over to the Q1 results. So, you know, this picture by now, many of you starting with the customer perspective, 27,000 customers by now. We have 49 business units. We started the year with 47. So we added two acquisitions during the first quarter. We have our feet on the ground in 13 countries. And the pro forma sales is after the two latest acquisitions up to 3.9 billion Swedish, roughly. And you can see the distribution of sales there across the different geographies. And you can see that we have roughly 25% in Sweden, which means that, of course, we are exposed to the foreign currency fluctuations for good or bad. And to my help, I have nearly 1,850 colleagues by now. Moving over to also the further breakdown of this diversification. The first pie there, you saw that on the previous picture, so that's the sales by market. If you break down on the business units, so no single business units is more than 7% of the total. And also on the customer side, so the top 10 customers are not more than 7% of the group, which of course gives us a great risk distribution. um moving over to to how we we operate a bit i mean we have a business model of course that we work with the business units that we have they are usually the market leaders they do have a high degree of recurring revenue and this is something that we continuously work upon so we further develop them through the decentralized organization a lot of product investment focus here and that really fuels the organic growth so we work with what we have the 49 business units And then we try to top up that with acquisitions each year. So far two this year. So the characteristics that we look for, also very familiar by now, of course, the vertical approach to everything. We look at the well-established profitable companies that has been around for a while. So they are usually the market leaders. They do have the proprietary software so that we are in control over the product development. and we do that with mainly internal resources and they have the recurring revenue model already to start with so that is sort of a few of the characteristics that we are looking for and then moving over to acquisitions for the past 12 months here you can see we did two during last year q1 q4 and then we started off really well in q1 this year with a dutch auto net and swedish infometric And you can see on the pie there the various acquisitions throughout the year. So for this year, it has been quite a good start, as we say, adding nearly 175 million Swedish kronor in terms of acquisitions to the growth. Sales by vertical, this is also a way of distributing the great distribution across the 22 different verticals that we're in. Property management being the largest one, followed by energy, healthcare, auto and finance, but we're not at all opposed to adding a few new bubbles on this chart so when we look at these verticals it can mean that we add another vertical or that we buy a company that further develops than existing vertical but we are quite agnostic so that we can do both ways so that means that we're not sort of solely dependent on any single industry single customer or single country for that matter Business units, this is what they look like in terms of size and the proportion of recurring revenue. You've also seen this quite a few years by now, but it gives us a good overview of the different sizes. And this is also kind of a blueprint for the M&A pipeline, what it looks like in terms of size. So the medium size is roughly 50, 60 million. sick company and that is kind of what it looks like out there. The sharing of knowledge across these business units is really the sort of superpower within the tech. So this is actually one of the most tangible things that a business unit experience when coming into a larger group like ours. So the the possibility to tap into the knowledge base of all the other 48 business units. And here we have some of our specialists for us. So that could be everything from customer support, finance, operations, of course, a lot of focus around IT, AI, UX, sales, marketing, and So forth. So this is a very sort of appreciated and very vivid and active part of what we do and how we can cross fertilize good ideas and really speed up development throughout the group. Of course, a few words on AI and innovation here. We always have this last couple of quarters. But overall, a great speed in the adoption across the group. For internal purposes, of course, we use that to increase our own internal efficiency a lot. But it's also a lot of new customer applications that are being deployed month by month at an ever increasing speed. But it's really down to the deep domain knowledge and the expertise that we combined with the proprietary data and all of that really strengthen the moats around the various business units. Here are some examples for the auto industry, Olisch Lager in the Netherlands, but they sell across the world, so they have seen some remarkable increase in usage. Just as an example, the garage owner or whomever it is, they can take just a photo of the license plate or the VIN number and then they automatically get all the matching components for their lubricants and so forth. It also shortens the time to market so that we can really do all this matching, new languages and everything else at a great higher speed and accuracy for that matter. and you can see a lot of the others if you go to the other end where we take energy for instance our models there that we do help the utilities to forecast their production facilities so that it's now 20 different ai models that we combine together to identify sort of identify really complex connections and linear connections between them. So that's weather data, that's consumption data, that's both in historical. And so it is a great value for our customers there and an ever increasing scalability for that matter. So really encouraging things that are happening throughout the group here. Moving over to the numbers then, some of the highlights here. So sales increased all in all by 9% to 955 million. The 9%, the mix here is roughly 5% organic. There's a 7% from acquisitions and then we have 3% FX headwind. But all in all 9%. And we are really back on track, which is something I'm very pleased with that we increase the profit levels at a higher pace than the we increase the sales. If you remember correctly, I mentioned that in the q4 report, which was something that we were sort of less happy with that we increased overall last year, yes, but the the margin expansion didn't really follow the top line. But now we're back on track where we can sort of increase the margins at a higher pace than we can increase the sales. So 11% up on both EBIT and cash EBIT, which is our sort of internal metric that we use. And 13% on the operating profit and also margin increasing by one percentage point. Cash flow, always the strong Q1 here, so super strong as always. But this is really something you can look for at the LTM basis. So what we have in the column there that the last 12 months, 1.1 billion in the total cash flow. So yeah, some of the details around that cash flow, like I said, a fairly strong quarter, perfectly in line with the previous years and really sort of what we expect. Like I mentioned, we usually have all the cash flow come in in Q1 and then we have a pretty flat for the remaining three quarters of the year. um net sales as i mentioned um up by by nine percent uh for the quarter up to 3.9 billion there in the pro forma sales look at the profit levels here i think it's really encouraging to see the the last 12 months there that we sort of back on track to increasing uh margins again so really promising, one percentage point up on the margin there on the quarter also from 25 to 26. And the cash EBIT, which is sort of net of any activations and amortizations. So very close to the operating cash flow. Also encouraging here that we increase it by one percentage on the margin and 11% on total quarter to quarter here. at 21% compared to 20 last year. And then the distribution here of our recurring revenues. So we had a 6% organic growth in our subscription-based, which is the SAAS fees, the maintenance fees, and the really sort of bulk of our income. So the higher blue bar there, really stable. You can see it's a bit down from Q4, but that is also to be expected. We have some Q4 results where a lot of customers are sort of buying bundles and then we recalculate them and see how much they spend on last year. So that's kind of to be expected. You can see that in the chart there. So the organic growth in Q4 was 6% all through the year and then 8% in Q4 and then down to six again. So it's kind of a normal swing there for us. Also, the transaction based grew slightly with 3%. So that made up. So on the mix there of the total is 5% for the quarter in organic growth. Like I mentioned, 3% headwind on FX. and then the 7% which we added through the acquisitions. And then just to sum things up, I think it's really encouraging that we're back on track to growing both margins and in absolute terms and the margin also in percentage expansion. Fairly good cash flow, good cash conversion. We're steady at the 80% level here. Two really nice additions with Autonet from the Netherlands and Informatrix from Sweden. And we're really seeing some rapid AI adoptions across the organization, both internally, but also in the customer application side. And as you might have seen also in the full report, we have some adoptions basically on the numbers in the back there too. align it with how the annual report is presented so that was something that we were asked to do and and we've done so and we also added some additional disclosures on the back here among other things the cash conversion which I just mentioned there which is at the 80 percent so you can see that in in the charts at the back of the report But all in all, fairly happy with the quarter and the progress from across the group here. And also, like I mentioned, that we are back on the small incremental improvements in both margins in absolute terms and in terms of efficiency. And with that, I think we will move over to the questions and answers section.

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