Welcome to Vitec Software Group Q4 Earnings Call 2025. 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, and a warm welcome to everyone attending this conference call today. My name is Patrik Fransson, Head of Investor Relations, and in the room with me is our CEO Olle Backman. As always, we'll first give you a short overview and then some comments on our year-end report released earlier this morning. Again, as we've done every time before, we will open up for questions after that. With that, I will hand over to you, Olle. Thank you, Patrik, and welcome everyone to this presentation. As I said, Patrik said, we will start with a brief overview of the group as such. This picture many of you have seen before, but it keeps on evolving all the time. So now we're serving 26,500 customers. All these numbers are per year-end. So by then, we had 47 business units. But as of now, as you've seen from the press releases, we have added another two companies to the group, so we're up to 49 BUs at the moment. Still 13 countries because they were both in existing countries. So the pro forma sales is roughly SEK 3.7 billion. And you can see the sales distribution there per market quite evenly distributed through our sort of more dominant home markets. In the later part of the Q during Q4, we added another home market, Poland, which we're very happy about. As you know, the definition of a home market is a country where one of our subsidiaries or business units has its origin. We have, of course, the four Nordic countries. We have the Netherlands. We have Belgium. As of Q4 last year, also Poland to that. Continuing on the diversification of sales here, it looks pretty much like it has for quite some time. It, of course, varies a little bit in the sales per market. But the point of this picture is that we have a great risk distribution throughout. We're not dependent on any single country, segment, or customer for that matter. And this is a picture showing us on what we call the responsible growth, which is one of our four key areas for sustainability as well. But this is kind of the dual engine of growth. We work with our business units, with the business model, which is, of course, striving to have a high degree of recurring revenues. And we develop them through our decentralized organization and really pushing the organic growth on the one side. And then we like to add acquisitions as we go along if we are lucky to succeed with that. And speaking of acquisitions, this is a picture for last year and first quarter up till yesterday or so. So we made two major acquisitions during 2025. Intergrip in the early parts of the year is a nice Dutch company added in January. And then in October during Q4, we added Polish NMG. With a strong start of this year, of course, we finished here in January and early February with Dutch Autonet and Swedish Infometric. Of course, these two acquisitions, we have worked a lot and hard with during 2025, but we just wanted to wait in the full-year numbers as you usually do when you start on closing up until the year-end. They slipped over into 2026. All four of them really nice additions, and they fit our criteria very well. Looking at the sales per vertical, as I mentioned, we now have 49 different business units, but we're roughly active in some 22 different verticals. You can see, of course, the larger ones where we have more presence, more business units, and active in more markets. That is energy, property management, healthcare, finance, and also real estate. They are the five, six biggest industries that we operate in. But as you can see, we're quite agnostic when it comes to new verticals. As long as the companies meet our criteria, we can add another vertical to the picture. This is a picture of the various business units as we've shown before. This is on a full-year basis. When we present it during the quarters, it's on a rolling 12-month basis for you to get a sense of the size and the distribution. As we've also said a lot of times, this is pretty much what the M&A pipeline looks like in terms of sizes. The average size of the nice VMS company is still there around EUR 4 million or EUR 5 million. You can see on the latest four acquisitions, I think that also shows roughly that average. And then growing into some of what I call our little superpower within Vitec, and that is sharing knowledge, which keeps on getting better and better with size, of course, and also with our own resources that we can accommodate this and facilitate it. So we have 49 different companies, but they are not competing in any sense. So it is full transparency internally where we can share knowledge, experiences, and also failures, of course. And this really fosters both a mentality of innovation. And hopefully, we can move a bit faster ahead because someone in the group has most likely already tried what you are thinking about back home. And we can share, like I said, really good examples from everything from development to tools we're using, pricing models, or whatever it may be. It is a very appreciated part of being part of a big group as opposed to being just run as an individual company. Just a short note on AI. I think we mentioned this last time as well. It's basically within these three sort of initiatives, we, of course, work with improving our own working environment and our own efficiency and also the kind of business development side of it. And then, of course, on the growth side where we implement AI into our features and our applications. So these are sort of the three streams that we are working on. And there are just some examples at the bottom there from some of the business units. But a lot of things are cooking. A lot of these forums, which I mentioned earlier, are full of great examples of both tools that we use but also applications and how to sell them and how to bundle them together with our software. Moving over to the sort of main topic for the day, of course, the report. These are the highlights. Like I said, I'm especially proud of that we were able to grow net sales on a total of 6% for the quarter and 9% for the full year. We will get into more on the distribution there, where most or absolute ballpark of that growth comes from the subscription-based revenues. The EBITDA level was flat compared to last year. As you remember, we also guided it a bit on the Q3 call. Q4 last year was exceptionally strong with a few large hospital projects in Finland running through the books. So it's really the Q4 2024 is exceptionally strong. So with that said, I'm quite pleased that we're able to basically match that for this quarter as well. And if you can see on the full-year total growth of 9% and roughly 2% and operational margin, 6% on the net profit increase, it's okay. It's not bad. But as I also wrote in my comments here on the Q4 report, I'm really pleased with the growth. But we have a tradition and also an objective to, of course, grow our profits faster than we grow our topline. And that has not been the case for 2025. So in terms of efficiency, there's more to do for sure, and we are working on that a lot. Other than that, when you dive into the numbers, perhaps it's shown on this page particularly, but one of the big items in the profit and loss statements are the reversal of earnouts, roughly SEK 200 million or so for the full year. Just a short comment, it doesn't affect the net profit. It doesn't affect the cash flow. I mean, it's two line items that are identical. It's just the accounting rules that makes that we have to put it like that instead of having it as a net. It is a proof that our sort of pricing model when it comes to acquisitions really work. We are prudent, and we say that, "Okay, fantastic. If the acquired company has a really promising future and the sellers want to have a part of that," we say, "Fine, I'll pay for it when I see it." So all the sort of subsequent payments of earnouts is connected to growth in profits. And if that sort of really high targets aren't met, then, of course, we're not paying it. So in this case, expectations were from the sellers' side that we will really reach overperforming. But in this case, they haven't overperformed. They have performed well. I mean, it's going according to plan. I mean, you can see that in the numbers. But it's just a way of sort of bridging the gap between a buyer and a seller but also sharing the risk. And in this case, we have been able to then reverse that risk in the sense that, "Okay, profit is okay, but it's not overperformed. So hence, we don't pay the earnouts." So I think that's a good point to just highlight. On top of that, of course, you can see that in the numbers, we had a bit of a currency headwind throughout the year, nearly 2% on the full year and then 3% on the quarter. And given that we have 75% of both sales and profits in other than Swedish krona, of course, it hits both the profit and the net sales. But currencies go up and down, so not much we can do about that. Another strong thing for the quarter was the cash flow, both for the quarter and for the full year. So cash conversion was good, and we really worked with the working capital there. And cash collection has been a sort of priority throughout the year. So we're very pleased about that. And cash flow for Vitec, as you know, you should really look at that full 12 months because we have Q1 being our absolute strongest cash flow quarter where we collect most of our prepayments. So you really need to look at this on a 12-month basis. But so if we look at the full 2025, if we take the operational cash flow and then we adjust it for the activations, of course, and the leasing payments, which I think is the prudent way, it's still an 85% cash conversion to EBIT or operating profit, which is a fairly good number. Just moving over to the sales per quarter, as you can see, it's a bit up and down. But overall, according to plan, we will get into the details, the split of organic and acquired in the pages to come. The EBITDA profit, same there, strong finish. But here you can really see the exceptionally strong Q4 from last year in that sense. And then Cash EBIT, which is our internal sort of metric, which is basically the operating profit but netted away from any capitalizations and amortization and depreciation on the intangibles. So this is really close to the cash generating. And here I'm pleased with the sequential increasing. If you can see throughout all of 2025, like I said, we had an exceptional 2024, and then we started up on a bit lower scale. But then we gradually, Q2, Q3, and now Q4, almost linear sort of increased the profits, which is what we aim to do. Then moving over to the split here of the recurring revenues. Here you can see the bulk and the basis for everything. That's the subscription-based revenues. It grew incredibly well, 8% on the quarter. You can see on the other quarters, it's been 6%, 6%, 6%, and then 8%. It is a bit of a Q4 effect where we have some of the reconciliations of our subscriptions take part in the later part of the year. So it's always a little boost there. But if you look at the full year, it's just over 6%, which is a really good number. Then in the bottom there, you can see the transaction-based, which has, of course, varied a lot throughout the year. We have committed that in all of the other quarterly calls. Basically, no change from that. So there's nothing sort of exceptional for the Q4 compared to the others throughout the year. Then just finishing off before the Q&A session here, I think it was a really good Cash EBIT margin expansion, consecutive improvements throughout the year, a really strong cash flow. Of course, we're very pleased that we were able to finish off three acquisitions in the last four months now, one during Q4 NMG in Poland and the two with the start of this year. A lot of work has been put into that, and it finally sort of materialized. With that, I think we will move over to 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 Investment Bank. Please go ahead. Thank you very much. And good morning, guys. Could you start by elaborating on the transactional revenues, which show much more stabilization now in the fourth quarter? Discuss maybe around the differences in year-over-year growth this quarter compared to the past. And if you can discuss these comparables going into the first quarter, if we can expect further stabilization for the start of this year. Well, yet again, on the sort of half of the transaction-based revenues are spread out through almost all of the other business units, and that is a very stable number. And then there is another half which comes from Enova, which is, of course, like we discussed many times, the grid balancing market. The grid balancing market has been more stable. But will it stay stable? It's very hard to predict. I mean, we have now one month into this year, and we see that it is still roughly more stable than during 2024. But if that is going to continue, like I said, I can't predict the weather in the Netherlands, unfortunately, so. But for now, it looks more stable than last year. So yes. Okay. That's very good. And then Q4 is generally renewal season for you, and we're already in February. So you should have quite some good visibility on growth pace in the recurring revenues for 2026. And given the uncertain times we are in now, would you consider giving us some indication of how the recurring revenue growth organically is progressing for Q1? Maybe without saying numbers, but maybe you can add in line with 2025 or in line with the fourth quarter or so on. What we can say is, of course, that the pricing mechanism within the growth is roughly 1% lower than last year. Just giving that the indexes that fuel that is roughly 1% lower. Churns are roughly the same as last year, around 1%. So we don't put specific guidance. But with that in mind, I mean, we are expecting 1% less from pricing, but still a few percentages up. I think the KPIs will sort of come in at roughly between 2%-3%. Last year, they were between 3%-4%. Okay. That's very good. So then in total, maybe some upsells and volume. Yeah, that has been the decade. Slightly more than the pace for. Yeah. I mean, all things equal, perhaps 1% down just from the pricing if we can keep up the upsell. Okay. That's very clear. And then, Olle, you state that you were not satisfied with the EBIT margin for the full year and gradually expected to reach at least 20%. What is the timeframe, and what kind of margin facing do you expect for the coming year? I mean, we actually hit the 20% mark, which is on operating profit. But it's also part of that goal is to increase, I mean, continuous improvements. That's what Vitec is all about, I mean, grinding, grinding, and gradually improving. And in that case, we didn't succeed during last year. So what I'm looking forward to and what we are pushing our business units towards, that's both through, of course, organic growth but also through efficiencies to gradually improve. No big numbers, but take a few steps every quarter to improve margins. That's what we aim for. Super. Thank you very much for taking my questions. Thanks, Predrag. The next question comes from Erik Larsson from SEB. Please go ahead. Hello. I had a question on sentiment. So obviously, looking at public markets, it's been clearly negative sentiment here over the past quarters and especially recently here. But at the same time, I have the impression that the general interest to acquire companies in your space, in the private market, has remained at a high level. So for you and your competitors being more operationally active, it doesn't really appear you see the same risks as maybe public investors do. So yeah, just wanted to hear your thoughts about that sort of disparity in perception. No, it's true that it's not necessarily true that we don't see any risk. I mean, we probably see parts of it, but we haven't seen it operationally. We can't see that our markets are sort of fading away, that we are increasing the competition. We have always competition, for sure. But we're not worse off than anyone else. We're using the same tools. We have the same talented people, so we can work with all of that as well. And on top of that, we have the infrastructure. We have the knowledge of the industries. We have the support staff, which know our customers. We have their confidence since many years. So it's all down to the brand promise to be able to rely on today and tomorrow. And if you sum all of that, you can do the math. I mean, we can count on these cash flows. We can make a fair assumption of the predictions. The risks or the fears that are out there, we can't really see them yet. Hence, the private market is still there. It doesn't move up as fast as the public market either, and it certainly hasn't moved down. But of course, over time, if there is a huge downturn, which has been here, we would expect it to materialize also in the private market because, of course, for some of these companies, it is a potential sort of next step to go public. So of course, we're looking forward to seeing some of slight sort of more modest pricings or what we could call it in the private market. But for now, the interest is still there. All these acquisitions we have done have been highly competitive. There's lots of people that are still very interested in these companies and see a great potential in them. Great. Thanks for that, Olle. I just had another question on your most recent acquisition here of Infometric. Could you just give any indication in terms of the revenue split, subscription, transaction services, etc.? Yeah, I can do that a bit. Like I said, it's roughly 45%. 40%-45% is the recurring revenue rate as we go on. And they have a highly interesting model, which we really like. So it is a SaaS company. They have their own software, which looks like all the other companies. But what they have is they also sell projects or they sell products. These are third-party component products, so not of our own. So we're just buying them on the open market, and we bundle it together either in projects or in product sales. But the conversion ratio from selling the products over to SaaS and software is close to 100%. So for every piece of hardware that gets installed because you need the meters out there. So this is IMD, so Individual Metering and Debiting, so for electricity and heating and water. Of course, you need the infrastructure out there. Currently, I think the conversion or the installed base is just over 20% in the market. For a foreseeable future, we can sort of fuel our recurring revenues with doing these projects and converting them over and having the long-term relationship that you have with your subscription customers. Roughly 45% is recurring revenue today on the software. Then the rest is, I think, 2/3 are our own projects, and 1/3 is pure product sales where typically other electrical contractors are buying the products from us. Okay. That's very helpful. That's all from me as well, so thank you. Thanks, Erik. The next question comes from Daniel Thorsson from ABG Sundal Collier. Please go ahead. Yes. Thank you very much. I follow up on Predrag's last question here on the margin journey ahead. Then how do you view your organic net recruitment pace going forward given increased productivity among software engineers? I guess you can become more efficient with AI, as you showed in the graph as well or in the slide as well, and need less developers. Is that the way we should see it, or? Like I said, we haven't heard from anyone in the industry and certainly not for ourselves that this has yet led to any sort of reduction in staff. But what we have been is a lot more cautious about recruiting. When you have people going to retirement or people leave for any other reasons, we really question, "Okay, can we shift around staff? Can we do things more with that efficiency?" So yeah, we're hoping for that. We have seen some of it, but it hasn't materialized super high yet. But for sure, we are sort of expecting, like any other technological shift that we have been through for our last 40 years, that we will become more efficient. But in software, also, in the decades and decades of improvement, most of that improvements end up with the customer. They get more bang for the buck. They get better software. They get more services. They get better features. So a lot of the productivity ends up at the customer's side. But for sure, we are expecting productivity gains. Yes. Following up on that one again, on that slide, you showed both growth levers from AI and cost reductions. Do you think you will see a greater effect from AI use cases, mainly on costs or on revenues a few years out? I think for now, we're mostly seeing it in actually products and in increased sort of pace when it comes to transforming legacy software, for instance, and things like that. So in that case, we're still seeing more on the revenue side than on the cost side because the difference between Vitec or any other VMS company and the horizontal is that we have 49 development departments. I have 49 of everything because that's the decentralized model, and that is working super well for us. So I think VMS companies, yes, we will have some efficiency in the sense that we will become more productive. And that should more be on the revenue side, actually, than on the cost side. Okay. I see. That's helpful. And then finally, which company or companies was the reversed earnout here in Q4 linked to? It's actually five companies in that sort of bucket because we do the it's based on the year-end numbers. So we have basically, if you take the recent acquisitions, so not the absolute latest one because that's too early, but acquisitions from the last two, three years. Yeah. I see. No, that's very clear. Yeah, that's all. Thank you very much. The next question comes from Fredrik Nilsson from Redeye. Please go ahead. Thank you. Hi, Olle and Patrik. I want to continue a bit on the discussion of AI from another perspective, perhaps. I mean, you have exposure to a lot of different industries, obviously. But if we focus on the most tech-savvy ones, what's the feedback you currently get from those regarding your product offering? Are they eager for new AI features, for example? A lot of our customers, or nearly all of them, want to discuss. And yet again, here it is that they should be able to rely on us to sort of that they can benefit from the AI functionality. And that's the beauty when you have a standardized software because we develop features which is based on the industry's total need. So they might say, "Okay, I have this need," but then we say, "Yeah, but this and this is in our pipeline." And they say, "Oh, great." So it's a benefit from the standardized software. But at the same time, they really want to hear that, "Okay, we're on it. We're working on it, and we have it in the pipeline, and we can also show them at present with some really nice features." But a lot of them are super conservative. They say, "Yeah, we want all of that, but please don't change anything." It's sort of the next sentence. So they are really sort of more or less reluctant to do any big bang changes because this is one of the moats around vertical market software, is that it is so embedded into the customer's processes. So it's a very slow-moving animal here. So yes, they want to benefit, but they don't want to change anything at the same time. So you will have to do this very gradually. But the big thing here is, or the important thing, is that they feel that they can benefit from these improvements over time. So a lot of them are not in a hurry. Great. That's interesting. Regarding other external costs, they were up almost 20% compared to the same quarter last year, which already was at a quite high level. Is that due to a different cost mix in acquired companies, perhaps, or am I missing something else? No, you're right about that. For instance, NMG in Poland, where it is sort of a bit market practice and market standard that a lot of the what we call employees, but they are still on contractors. So it is a bit different mix in that sense, yes, from the acquired companies. Great. Thank you very much. That's all for me. The next question comes from Thomas Nilsson from Nordea. Please go ahead. Thank you for taking my question and congratulations on a strong report. I just want to ask some of these obvious questions that I get from investors all the time. Do you at Vitec see any risk of seat compression going forward due to AI? That is, customers are becoming more efficient, and they may also hold back on recruiting, resulting in fewer hires and fewer software seat subscriptions. What do you answer when investors ask you that? Well, in the long run, yes, that is a possible development. And that is why we have been working for the past three years, I think, in the sectors where we see that. It's not across the line, for sure. And like I mentioned, we have less than 1% churn still this year. So it's not something that we see, but it is a potential future development. So we have been working with pricing models, more sort of value-based pricing because if our customers become more efficient through the software that we are providing, we are adding a great value for them. And really good if they can benefit from being more efficient, but we shouldn't get punished for it. So we must sort of work with the business models and the pricing models. And this is, yet again, not exclusively for Vitec. That is across every software company. We're not seeing it as of yet, seat compression—no. But it has been on our radar for many years because it is a potential development going forward. So the answer to that is looking into the pricing model and adding more value to our customers. And of course, we should be remunerated for adding value. Thomas, Patrik, just short also. Also, I think it's important this is nothing new. I mean, digitalization has always been about improving and do more with less people. So that's been ongoing for like 40, 50 years. That's the whole thing about digitalization. So that's nothing new. Yes, the pace might increase, for sure, but it's not a new thing for us to work on. It's always been there. So business is usual in that sense. It's always been the case. Will the pace increase? Probably. And then, like Olle said, that's how we're thinking of it and according to pricing models. Okay. Thank you very much. The next question comes from Victor Lindström from SpareBank 1 Markets. Please go ahead. Hello. Hi. Just one question for me here. Given the current market dynamics, would you say that you have changed your acquisition criteria when evaluating new M&A targets? Not changed it. I think that is one of the big things here that we are very consistent when we look for the criteria. Of course, pricing. We always try to pay a fair value within what we think is sort of possible. That's why also the pace has been a bit less. So we have tried just as hard. We have looked at just as many companies, but we have just lost more because we are still quite prudent when it comes to pricing. And of course, like we said initially, the downturn in public valuations, if that should impact on the private market, yes, if it is in the long run because some of them have the public market as sort of a potential next step. So yeah, we would look forward to that. But as of now, like I mentioned, there are a lot of nice companies out there. There is still high competition for these targets. And as long as we can sort of do our calculations and if it is within our criteria and our valuation models, we will try to continue. All right. Thank you very much. That was all for me. The next question comes from Daniel Lindkvist from Danske Bank. Please go ahead. Hi, guys. So just to follow up on Dan and Fredrik's questions earlier on. Basically, with the NMG, is there a seasonality to be taken into account? I mean, it seems like they've added quite some in Q4 given the expected size of the acquisition and also what you report if they would have been in the numbers for the full year. Well, first of all, NMG is growing quite extensively. It is a really growth case. That's what we expected. And then the model there, their customers are the grid owners in Poland. There are only seven potential customers. I think we do business with six out of seven. And the way these models work, you sign multiple-year contracts where you do a lot of development. So there is a high degree of services. And all that services is basically CapEx for our customers. And then that translates over into recurring revenue. Usually, 15%-20% of that services then fuels next year's recurring revenue. So NMG is growing fast, and they are doing a tremendous job. So we are expecting that to continue at least for a few years because they have lots of interesting prospects in the pipeline. Okay. Great. And then just with, I mean, now I'm trying to get my model to work here. So basically, on the cost of goods sold and other external expenses in relation to the NMG subscription-based recurring revenues, service revenues, and other revenues, is there something to take into account with the gross margins? Are the subscription-based recurring revenues on lower gross margins than we're used to, or are the third-party? No, the subscription for NMG, that's pure software revenue. So it is equivalent to the others. It's a 90%+ gross margin on the subscription part. Then the services, of course, that's ours that we put in. Yeah. There's no split of income from them in any way. That's also a high gross margin business. Then it's in other revenues that the third-party part of their business ends up. No, the NMG doesn't have a lot of third-party. They either have services or they have recurring revenue. That's what they sell. They don't sell any hardware. They don't sell any third-party components. Okay. And then just on the other external expenses, should I read that as the cost of revenue up there instead of in personnel expenses then, or instead of as in cost of goods? Okay, as in personnel expenses. Great. Then nothing further from my side. Thank you. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. Okay. Thank you all for participating and the questions. And then just summing up, I think we posted a decent quarter. We were happy with the growth. We could have done better on the margins, although they were okay. And cash flow-wise, it was really strong. So that was a positive note. And of course, we managed to close these acquisitions that we're super happy with. So that would be all for now for us. So thank you for listening, and take care.