Welcome to Vitec Software Group Q3 2024 report presentation. 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 five on their telephone keypad. Now, I will hand the conference over to CEO, Olle Backman, and IR, Patrik Fransson. Please go ahead. Thank you, operator, and a warm welcome to the fourth conference call in our history. I'm Patrik Fransson, Head of Investor Relations at Vitec Software Group, and with me in the room is our CEO, Olle Backman. In this call, we will cover the report released this morning, but also give a short overview of Vitec Software Group. And, as always, after the presentation, we will open up for questions s o Olle, with that, I hand over to you. Thank you, Patrik, and welcome to the company presentation here for the Q3 report. And as always, I will start with a run-through over Vitec Software Group, starting with this overall picture, as always here. Starting customer perspective, 25,000 customers, roughly still in line with what we had last quarter, 42 business units by now, and a business unit is a company or a group of companies. That operate independently within our very decentralized organization. 12 countries, so last quarter, it was 11 s o we added Belgium now as a new home market with the latest acquisition of Trinergy. So we were replaced with that. Pro forma sales, so that's a guidance of the run rate that we're operating at, is roughly SEK 3.3 billion, and the recurring revenue part of that is nearly 87% a nd I have nearly 1,570 colleagues of ours, and as you can see, the sales distribution there by market i will get back to that a little later. Strategy chain, nothing changed here. As always, you know, we have everything from our values through the brand promise, business concept, objectives, up to our vision. And the objective for the group is to be a profitable and sustainable growth company that develops and delivers vertical market softwares. So nothing new here either. And how do we go about this responsible growth theme of ours? Well, first of all. Our business units are already market leaders, usually, when they come in or when they operate within us. They already have a decent or too high percentage of recurring revenues. And what we do is that we work very closely with them to develop them further. And that we do through our decentralized organization. We do that through continuously monitoring that we are on the right level of product investments. So we don't under-invest, but we also don't over-invest s o we have a pretty good idea that has sort of evolved over time, and it's the combined experience of all the years that we have been working on just how much you need to invest in order to be to rely on today and tomorrow, which is our brand promise. And of course, this all fuels our organic growth that we work very, very closely and hard with the companies that we have. So we work with all our 42 business units in a similar way and pushing them to become a little bit better each year. And then we add acquisitions on top of that, and we do that through searching very thoroughly throughout Europe, using the same kind of characteristics that we look for. So they should be vertical, they should be established and profitable, usually market leaders, as I mentioned. They have a proprietary software that means that we own our own IPR, that we are in control over the technology, and they have a decent amount of recurring revenue. So if they fit these criteria, we are very happy to look into them for future potential add-ons to the group. And so far this year, we have succeeded in buying four nice vertical market software companies w e started up in Q1 with LDC, in Q2 with Bidtheater, and then during Q3 now, we concluded the acquisition of Swedish Taxiteknik, and we also added Belgian Trinergy. All four of them, really nice additions that fit our criteria very well. So we're very happy with that. If you look at the group from a vertical perspective, like I said, we have 42 business units t hey operate in roughly 20 different verticals. And as you can see, the property management sector and the energy sector are two of the biggest ones, followed by healthcare or finance. And as you can see on the distribution here, we're not dependent on any single sector, but even within these sectors, we always operate in facilitating and providing business-critical softwares for our customers s o that gives us a great stability to work from. The business units, you will find this chart also in the report. I won't go through all the details, of course, but you can see just the distribution there on site and the level of recurring revenues that they operate, and also which year they came into the group. As I mentioned before, Vitec is becoming of the size that we are basically a mirror image of the vertical software market in Europe s o when we look into the pipeline for future acquisitions, it pretty much looks like this when it comes to the different sizes and then shapes of the companies. Organization, nothing really new here either w hen we work in a very decentralized model, so it's the red box there at the bottom with all the business units, that's where all the action takes place t hey are autonomous, t hey have the resources available to conduct their business in a very good way, and the rest of us are basically there to coach them, guide them, and help them to become little bit better each year. One of the greatest things about being part of a group and also one of the big value adds that we present to potential new acquisitions is the sharing of knowledge, what we call the sharing forums here. Here you can tap into the knowledge pool of the other 42 business units, and this is a really great community to be part of, because being a single company in a small vertical and being a market leader, it's a pretty lonely place to be, usually, In order to have this inspiration and to find new ideas and also share your success stories, we have a lot of these sharing forums internally. So this is something that has evolved over time, and we're becoming better and better at it, and it's very, very much appreciated among the business units. Then going over to the interim report for the Q3 and also for the first nine months. Looking at the quarter, sales was up to SEK 809 million t hat's an increase of over 15%, and we look at the recurring revenue part of that t hat increased by 17%. The EBITDA level increased by 3%, and the margin was slightly down from 34% last quarter to 31%. This is, as I mentioned in the report, mainly an effect of the distribution of the revenues, where both service revenues and license sales, which is a fairly small part of the total package, but of course it has quite an impact on the short-term margin, so it was a bit lower on that, and it is partly an effect of the trends that we've been seeing, that customers are not investing that much in new rollouts and new features, or changing over from one competitor to us, so it's a bit slower on the new sales side w e have still seen quite a decent amount of upsales to existing customers. I think that's pretty much it, and also the fact that we have done comparatively a higher degree of our transaction-based revenues, which has a bit lower gross margin profile than the others, but that yet again not something that I'm really worried about in the long term. Operating profits up by 8%, and when you look at earnings per share, which is one of our key metrics that we work with closely internally and also from the board here, it's an increase of 27%, which is a really good number. Cash flows roughly in line with last year, and like I mentioned, the two acquisitions of Taxiteknik and Trinergy closed during the quarter. Look at the first nine months. You can see that the growth level is roughly in line, 18% on the total and 22% on the recurring revenue. You can see the EBITDA margin is slightly down to 30% from 32%. Operating profits up by 17%. Good number, but the really strong is the cash flow for the first nine months, SEK 939 million compared to SEK 727 million. We think that you should always look at cash flow when it comes to Vitec. E ither on a full year basis or at least on a rolling twelve-month basis, because we have a really, really strong Q1 when we have a lot of prepayments coming through, and then we basically live off that for the consecutive three quarters. So I think it's a, it's a fairly strong cash flow position that we have for the first nine months. Net sales, basically, these bars explain what I have t he compounded growth over the years has been 22%, and like I said, the run rate today is up to SEK 3.3 billion. You can see it's a bit down from Q2, but during Q2, we have the seasonality effect in our transaction-based volumes that are usually really high during Q2, so that's to be expected. EBITDA margins pretty stable, so no drama here l ike I mentioned, a bit down in the quarter, but overall around the 30% level, still a fairly good number. The allocation of the revenues here, you can see, really the bars there on the basis on the subscription-based revenues, which is the light blue in the bottom, growing at a steady and a really good pace. Very stable, and then they have the transaction based on top of that, a bit more volatile b ut as I mentioned, it has two very different gross margin components in this, so the profit is not affected in the same way from these swings. Organic growth, like we have measured it, which is on a rolling pro forma twelve-month basis, or that's good to give the guidance on the run rate today and also on the long-term perspective that we have. And as you can see here, we have had an FX tailwind for the past two years i t's not that we have forgotten to calculate it, it is actually a zero at zero level just now after nine months s o we don't have any FX effects on the total group. And this is the chart that talks about this organic growth, and then there we have the 9% on the subscription-based revenues. Which we think is a very good number, and then we have the transaction-based t his is growing at a lot 17%, but that's, like I mentioned, a bit more volatile, but this was on a rolling 12-month basis, so it's still a great addition, and the total is up by 8% a nd like I said, there is basically no FX effects in these numbers. Diversification of sales just gives you the feeling that this is a very sort of distributed model, that we are present in many markets, and we have a lot of customers, so no single dependencies here, and which is so totally in line with what we have talked about before and what we aim to be. And lastly, just a few slides summing up here. Think fairly okay quarter, growth-wise, a bit lower on the margin, like I said, but that's due to the distribution in the revenues for that specific quarter. And then we finished two really nice add-ons to the group with Taxiteknik and Trinergy coming in. So by that, we go over to the Q&A session. 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 Erik Larsson, from SEB. Please go ahead. Thank you, and good morning h ope you're doing good. I got three questions. I'll take them one by one so first off, on the margin, I hear you on these mix effects, but at the same time, those same mix effects, they were larger in Q2, and Q3 often has these seasonally stronger margins on top. But this year they were around the same level. So I'm just curious, are there any parts? where you see a slowdown that also plays into this weaker margin? No, no, not really slowdowns l ike I said, the business units that has that profile of license or service revenue that has been slow all year, basically, but it's also a bit of a seasonality because, of course, we have the holiday effect when it comes to services as well, so when you compare Q2 to Q3. We're having a more European footprint now, so we don't have holidays in June anymore w e have holidays in August and September instead, so it's a bit of seasonality there in the service revenue and also then, of course, sales in... for licenses, and there are mainly the companies outside of the Nordics that has that distributions. Okay, great. And then, in terms of these, you know, the new sales, are there any changes in the market regarding... You know, this has been slow for quite some time a re you seeing any changes? Not so that we have an effect of it yet, but we start hearing at least from our customers due to the fact that there are lower interest rates coming in and energy prices have gone down, so the sectors where our end customers, so to speak, are more sort of affected by that, hearing some positive signs, actually, but it hasn't materialized in any sales or revenues just now. For sure, it's starting to sound like investments will start picking up, probably during next year. Okay, great. And then a final question on my end, regarding price. What are you seeing? in relation to these KPI-linked indices as a basis for price hikes next year? We have to basically wait and see, so there's nothing here w e have raised. We've done our price increases already w e do that in Q2 and then some of it in April, so that's all done. Now we just have to wait and see, and that is starting s ome use the October index, most use the December indexes. w e just have to wait and see there, But for sure, it will follow basically the local CPIs. ... Okay, great. That's all from me. Thank you. The next question comes from Daniel Thorsson from ABG Sundal Collier. Please go ahead. Yes. Hi, Olle and Patrik t hank you very much. I have two questions i 'll start with one on the transaction-based revenues. That was around SEK 194 million here in Q3. Can you share? a proxy for how much Enova and perhaps Bidtheater contributed with in the quarter, respectively? No, we don't disclose that on that level b ut you can see, of course, if you take the average before, but we have been at that 10, roughly 10, 11% level for years and years and years, and then Enova came in, and then Bidtheater came in now, first in this quarter, fully, because now we bought them in June. So I would say the difference between that long-term rate and that is a good proxy for their contribution. Yeah. Okay, that's, that's fair enough a nd, and just on Bidtheater then, is there any seasonality effects there, or are revenues evenly split throughout the year, roughly? Yeah, they are for sure more evenly because they are more connected to volumes in the advertising market o f course, during the summer it's a bit lower, perhaps, but not at all in the same way as for Enova that has, you know, the weather to tamper with so. Yeah. So it's Bidtheater is a lot more stable on the top line there. Yeah, I see. And then, second question on M&A here t o maintain roughly your historical growth pace, you either need to do more acquisitions or larger, obviously. What do you think is most likely to happen in twenty twenty-five? Is it to do larger acquisitions or, or more? I hope for a bit, a mix of both. We have the capacity to do more w e did six last year w e've done four so far this year e can onboard more. With the processes and the organization that we have, so we don't need to add any more resources. For that respect a nd then, like we said many times before, larger companies, yes, when we go into larger countries, there are you can grow a bit bigger because a lot of the companies are still very domestic. And of course, like we said, the Netherlands is nearly twice the size of Sweden, Belgium is roughly the size of Sweden. So for sure, there are more companies out there that can become a bit larger than the average Nordic company. So hopefully a bit of both. Yeah. Excellent. Thank you very much. The next question comes from Christian Binder from Redeye. Please go ahead. Hi, and thanks so much for taking my questions. First off, regarding the acquisition of Trinergy, once again, like for Taxiteknik, you have some, at least initially, some minorities there that you plan to buy out eventually. Can you elaborate? a little bit on the reasons for keeping some minorities there in the initial years? Yes, that's true s o both of these acquisitions has done w e buy a majority to start with, and then we have a very clear path on how to go to 100%. So it is in all essence a version of an earn-out, but in this both these companies are really high growth companies compared to what we normally see. So we really want the entrepreneurs to feel that they are part of the company and also, of course, to meet the expectations of valuation going forward i t's a really good sort of risk distribution and also incentive distribution between us and the sellers. And all the sellers of both of these companies are still very much present in the company and continue to drive this growth. So that's why we use that sort of technique. We have tried it many times before, i t just hasn't been. Yeah, the cases has not been as clear as these two, but they are really nice, high growth companies in our world s o then this is a good model for that. Got it. And, you know, I guess most people would think that these, smaller or at least higher growth companies, traditionally are more kind of targets for VCs or, PE companies. Can you elaborate a little bit on? you know, if kinda, for example, these minorities, the main reason why they still choose you, or is it the value proposition that you maybe care a little bit more for the culture, than other types of owners? I can speak for these two acquisitions. The entrepreneurs there have been very clear on that they chose us because this will, like I said, they are targets that has been sort of on the market and so it's a competitive environment that we operate in b ut they've chosen Vitec for the same reasons as the others, that they want to come into the group t hey think that we can add value over time, and they really like our long-term ownership idea here. So it is back to the same reasons that we sort of use as our unique selling or buying points when we present ourselves to other companies s o they really like the entire concept of being a perpetual owner, being a software company. I think that's the main reasons that they chose us. Then, of course, compared to PE or VC, I mean, they usually reinvest quite a lot in the companies, and of course, buying it gradually instead i think that's a better way of keeping the same incentives. Perfect. That was all from my side. Thank you. The next question comes from Victor Lindström from Nordea. Please go ahead. Hi, Olle and Patrik, and thank you for taking my questions. I have just one related to Enova know that in Q2, Enova had a slightly weaker product mix that harmed the gross margin. Has this been the case in Q3 as well? And is there any particular reasons for this? No, it's basically the same mix as is in Q2. So during the summer, the volumes are really high in what we call activated energy. So, balancing markets, it's about buying like an insurance premium for the grid owner s o for the insurance premium, we have a decent profit, and then if you call on the energy, so activate it, then, of course, there is a cost to serve there for our customers, s o they have to either produce or consume. And then, of course, they need to be compensated for that, so the activated energy is a bit lower margin a nd during the summer periods here, both Q2 and Q3, there's a lot more activated energies s o that just follows the seasonality in that sense. So it's basically the same reasoning in both these quarters. All right. Thank you very much. That's all for me. The next question comes from Erik Sandstedt from Kepler Cheuvreux. Please go ahead. Thanks. A few detailed questions to start off with. If you look at acquisition-related amortization, it was flat in the quarter compared to Q3 last year, and it normally tends to grow year on year. So what explains that flat development on the cost line, and how should we think about it going forward? I think that's a very sort of a mechanical thing. We do some reevaluations up until after one year w ithin twelve months, you have to set the PPA, so the purchase price allocation. You do a preliminary one to start with, and then after one year, you do the final one, and then there can be some alterations in that, but that has been the case all along. I think that's more mechanical. Okay, thanks. And then, other external expenses declined by some 7% year on year in the quarter. Why did that line decline, and how should we think about it going forward? I think it's just a little lower, sort of activity during the quarter. So there's no sort of strategic or. So it's just that, y eah, I think it's a bit on the holiday effect like I mentioned. We have more and more companies in the Benelux areas. They have holiday periods in August and September, rather than the early parts of the year, so it's a lower activity. Okay, and then another detailed one. In terms of financial expenses, the non-cash revaluation of the earn-out was quite small in the quarter, I think some SEK 2 million or so. Is that purely a reflection of lower interest rates? or any other factors there, and is Q3 a good run rate going forward for that line? No, that's for sure y ou're absolutely right i t is part of the fact that the interest rates are going down, and also that the larger portions of earn-outs that we have are becoming sort of closer to us in time. So it's also time. So I would say time and interest rate related. But no sort of one-off effect in this quarter due to the change in interest rates? No, no, no. Because you do the revaluation once, and then you just revisit it and see, are there any fluctuations? And then we haven't added any really great earn-out components. Yeah, got it. And then finally, perhaps more of a long-term fundamental question then, but if you look at the returns in the business, maybe return on equity or return on invested capital, been declining over the last couple of years or the last few years. Well, why is that, and how do you intend to address it going forward? I think we mentioned a lot of times before, one, of course, multiples have gone up during the past three, four years. If we could buy really nice companies between five and seven times the Cash EBIT before, now we are at seven to nine. Of course, that reflects the return on the assets. And then just the pace i mean, we have increased the pace a lot, and you get the full balance sheet and the full asset, day one, and nothing of the profit s o there's also a lag here. And as long as we keep up this pace, we are a bit sort of punished by it, going backwards s o you need to sort of try to see that on some rolling twelve-month basis instead, and then it is a bit higher. But, yeah, for sure, compared to five years ago, it has gone down. Okay, thanks. That's all I had. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Daniel Lindquist from Danske Bank. Please go ahead. Okay. Hi, guys. Daniel Lindquist from Danske Bank. Now that we're touching on the real details in the report, if we just look at the line, other income. I mean, I guess we all know the approximate drop-through from the other lines on net sales, but on other income, it's become substantially bigger. And how should we view that? What is in that line, and what's the drop-through down to the cost side of that part? As you can read by the nature, the other revenue is just other revenue, so it's sort of non-strategic, very bumpy, odd things that come up. Usually, hardware sales is in there on a more constant basis s ometimes we need to bundle something up to our customers. And then it's a fairly low margin, and there's also an occasional some one-off costs, or sorry, one-off revenues. If you have customer negotiations or anything like that that we have just been prudent not to fill in before it's actually finalized. And then it could be higher margin i t's a bit of a bumpy thing, but we don't expect that to be anything major going forward. In this quarter, it was a bit higher than usual, but it's not something that we will see going forward. So it is a great- But it was a bit higher. It was a bit higher, but with lower margins this time around, or how should we read it? It's higher, but I would say the average mix there on what's sort of what is hardware and what is more service related, that's yeah, fairly light i don't think it was even higher or lower. It was, you know, on par with the earlier years. Okay, perfect. Thank you so much. That's all from me. Thanks. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. Okay, that seems to be the questions during the day, and we thank you for listening in, and we hope to catch up with you on our next quarterly report, which will be the Q4 presentation. So thanks for listening in. Bye-bye.