Tecnotree Corporation Financial Report 1 Jan - 30 Sep 2024 (unaudited)

During the first three quarters, Tecnotree achieved an 11% increase in revenue on constant currency basis and a 28% increase in EBIT on a constant currency basis

The Tecnotree strategy has delivered free cash flow for a second consecutive quarter

January-September 2024

• Net sales EUR 54.0 (56.2) million, -3.9% year on year change
• Net sales in constant currency EUR 63.2 million, +11% increase year on year in constant currency terms
• Operating Profit before one-time expenses EUR 15.9 (16.0) million. In constant currency, up by 28%
• Operating Profit margin before one-time expenses 29.4% (28.5%).
• ­Foreign exchange losses EUR 2.2 (3.8) million
• Net Income before one-time expenses of EUR 10.7 (8.8) million.
• Net Income for the period EUR 7.8 (8.8) million.
• Gross cash inflow from operating activities EUR 12.8 (7.6) million, an increase of +68.4% year on year
• Earnings per share EUR 0.46 (0.02*)

Third quarter (July-September 2024)

• Positive free cash flow EUR 1.7 (-7.9) million, the second quarter of positive free cashflow
• Net sales EUR 19.0 (21.4) million, -11.2% year on year change
• Net sales in constant currency EUR 20.2 million. 5% decrease in constant currency terms
• Foreign exchange gains EUR 0.3 (-1.9) million.
• Net income for the period EUR 4.1 (3.2) million.
• Gross cash inflow from operating activities EUR 5.5 (1.2) million, an increase of 358% year on year
• Earnings per share EUR 0.24 (0.01*).
• Order book at the end of the period EUR 75.1 (78.0) million.

* On 19 April 2024, Tecnotree executed a reverse split, i.e. the reduction of the number of shares where every 20 old shares in the company corresponds to one new share.

[][]
Key figures, MEUR 7-9/2 7-9/2 1-9/2 1-9/2 1-12/2023
024 023 024 023
Net sales 19.0 21.4 54.0 56.2 78.4
Adjusted operating 5.0 6.2 15.9 16.0 23.8
Profit [1]
Exceptional items 0.0 0.0 -2.9 0.0 0.0
Operating profit (EBIT) 5.0 6.2 13.0 16.0 23.8
Pre tax profit 4.9 4.2 9.8 11.2 13.9
Adjusted pre-tax profit 4.1 3.2 10.7 8.8 13.9
result for the period
[2]
Result for the period 4.1 3.2 7.8 8.8 11.2

Earnings per share, 0.24 0.01 0.46 0.03 0.04
basic, EUR

Order book 75.1 78.0 75.1 78.0 80.2

Gross cash flow from 5.5 1.2 12.8 7.6 17.4
operating activities
Change in cash and cash 0.2 4.9 -3.8 3.5 8.6
equivalents
Cash and cash 17.0 15.5 17.0 15.5 20.8
equivalents

Equity ratio % 65.8 70.8 67.5
(Equity/Total
Liabilities)
Debt Equity ratio % 4.5 6.9 6.6
(Debt/Equity)

Personnel at end of 810 836 883
period

1 Adjusted operating
result = operating
result before one-time
items.
2 Adjusted result for
the period = result
before one-time items.
3 On 19 April 2024,
Tecnotree executed a
reverse split, i.e. the
reduction of the number
of shares where every 20
old shares in the
company corresponds to
one new share.

Unless otherwise stated, all figures presented below are for the financial period 1-9/2024 and the figures for comparison are for the corresponding period in 1-9/2023.

Prospects 2024 and 2025

Tecnotree revised its guidance on the 6[th] of September 2024 to provide further clarity on its financial management metrics.

• Revenues for 2024 are expected to grow by 2-7% in constant currency.
• EBIT for 2024 is projected to increase by 7-15% in constant currency.
• Free cash flow for H2 2024 is estimated to be between EUR 2-5 million.
• Capex as a percentage of sales is targeted at 10-12% by 2025.
• Receivables days are expected to range between 100-140 days by 2025.
• Annual free cash flow for 2025 is projected to exceed EUR 3 million.
• Dividend payout policy targets 10% of free cash flow from 2025
• FX exposure to frontier country risk will be reduced to 10-15% within three years.

From the CEO's desk

Delivering on our strategy promise to deliver Free Cashflow

Revenue

In this quarter, Tecnotree achieved revenue of EUR 19.0 million (constant currency EUR 20.2 million) compared to EUR 21.4 million in Q3 2023. During Q1-Q3 2024 revenue earned was EUR 54.0 million (constant currency EUR 63.2 million) compared to EUR 56.2 million in Q1-Q3 2023. Tecnotree's focus has been around changing its revenue mix towards better profitability and cash flow. The company is achieving this through new business growth in the European and North American markets. The share of revenue from North America and Europe in Q3 2024 was 22% compared to 17% in Q3 2023. We see further momentum in our North American and European order book. This has been made possible by Tecnotree's leading product stack and leveraging our new System Integrator partnerships in developed markets.

The company has focused on moving to ARR-based models. While in the first half of the year, the company saw FX losses disproportionately impacting its ARR revenue, the company was able to achieve a 7% revenue growth in ARR in Q3 2024 over Q3 2023.

Order Backlog

In Q3 2024, Tecnotree received new orders worth of EUR 23.8 million compared to EUR 13.4 million in Q2 2024. Tecnotree's order backlog grew modestly to EUR 75.1 million compared to EUR 72.6 million in Q2 2024.

Operating Profit (EBIT)

EBIT in the Q3 2024 was EUR 5.0 million (constant currency EUR 6.5 million) compared to EUR 6.2 million in Q3 2023.  For the period Q1-Q3 2024, EBIT stands at EUR 13.0 million (constant currency EUR 20.6) compared to EUR 16.0 million in Q1-Q3 2023.

OpEx Savings

OpEx reduced by 10% in Q3 2024 to EUR 14.0 million (EUR 15.4 million). Q1-Q3 2024 OpEx also reduced by 5% to EUR 38.2 million (EUR 40.4 million).

This aligns with our target to generate EUR 4.5 million in savings by the second half of 2024 and an additional EUR 7.0 million in 2025. These actions reflect Tecnotree's commitment to operational excellence and financial discipline, ensuring long-term profitability and resilience.

Focus on Free Cashflow

Tecnotree has targeted sustainable free cashflow generation in the second half of 2024 and 2025. Q3 2024 marks the second quarter of free cashflow generation, reporting positive free cash flow EUR 1.7 (-7.9) million. Measures to achieve this include better management of working capital and capex efficiencies. The CapEx to Sales ratio for Q3 2024 stood at 11% as compared to 17% in Q3 2023.

Net Profit

Tecnotree's net profit for Q3 2024 was EUR 4.1 million (EUR 3.2 million), reflecting the positive impact of our cost-efficiency initiatives. Tecnotree earns revenue in multiple currencies, with a significant portion in USD. In Q3 2024, the company achieved exchange gains of EUR 0.3 million (loss of EUR 1.9 million).

Collections

Collections for Q3 2024 totalled EUR 14.8 million (EUR 11.9 million). At the end of the Q3 2024 Accounts Receivable balance reduced by 7.8% to EUR 30.7 million (EUR 33.3 million). This improvement reflects our success in enhancing cash collections. As a result, DSO improved to 153 days, down from 170 days in the previous quarter.

Business Outlook

The investments on productization over the last few years has resulted in sales growth in mature markets and a stable ARR based order book. The productization has also helped us scale by signing new system integrator partnerships. The integration of our AIML investments into our digital stack has led to productivity gains for both our customers and our R&D teams internally. Our continued adherence to TMForum standards, recognitions by Gartner in their Magic Quadrant and 4 Hype Cycles which has resulted in improved  market share prospects, particularly in North America and Europe. In addition, Tecnotree has achieved recognition by IDC, a leading telecom analyst firm, for enterprise monetization and by Precision Reports as one of the largest billing and revenue monetization vendors consecutively for 2023 and 2024.  

Tecnotree Moments launched a GenAI social commerce agent with a Tier one telco in the MEA region and has been nominated for a "Vendor of the Year" award along with a Tier 1 CSP group in LATAM. Continued demand for our digital platform and Tecnotree moments social commerce agent further validates our strategy.

The company focus for Q4 2024 and beyond is a continuation of the same - building our order book in North America and Europe optimizing the cost, improved working capital, continuing the  recent trend in positive free cashflow in 2024 and beyond as per the guidance provided.