Earnings Call: Q4 2023

Mar 20, 2024

Annual report

Welcome to this live annual presentation with Danish IT company Vertec. This will be followed by a Q and A, where viewers also can ask their questions in the live chat. So please join me Sounds great. How would you describe 2023 in brief? Well, very short, in 2023, ViaTech actually showed very great resilience in uncertain markets and we were able to continue our journey of profitable growth. Yes. Thank you, Michael. And I will be back for the Q and A. So please go ahead with your presentation. Okay, thank you. So my main message here today is that our journey of long term growth is going on and we will continue growing in the future as well. So, our long term growth potential is intact. Now in 2023, we had a focus on business development inside of the clean energy sector. And this investment actually paid off big time. And we were able to grow the revenue in this business area by 70%. It is a big success for us and we want to continue focusing on this business area and we actually expect to continue the growth this year. And this business area has the potential of becoming our biggest business area by the end of 2024. In order also to support our growth, we invested in new headquarters in both Bucharest and Cluj this year. We also professionalized the Board of Directors by appointing 2 new independent Board members during the year. And as part of our journey towards the NASDAQ main market, we also started implementing ESG inside of ViaTech, and we can actually see our ESG baseline in our published annual report. Next slide, please. In 2023, ViaTech realized revenue of DKK70,400,000, which was a growth organic growth of 7%. Our EBITDA was DKK6,300,000 and our EBITDA margin was 8.9%. As for key ratios, we realized DKK 0.53 in earnings per share. We have a very strong equity ratio of 61.4%. It's a growth of 18% compared to the previous year. And our liquidity ratio is almost 162%, also a significant growth compared to 2022. And based on these strong ratios, the Board of Directors will continue our dividend policy and will recommend to the Annual General Meeting that Viatek pays out the equivalent of 4.2 percent in dividend at the Annual General Meeting in April. Next slide, please. As for our outlook for 2024, we expect an organic revenue growth of 5% to 11% this year And our EBITDA, we expect to grow between 3% 19% during the year. Next slide, please. Our accelerate 25XL growth strategy is ongoing. After 2023, we have taken a status of the 1st 3 years of the strategy implementation. Our revenue has grown by 155% since the end of 2020, and this corresponds to an average annual growth rate of 36%. Our EBITDA has grown by 110% in the same period, which is an average annual growth rate of 28%. And employees are really, really important for us. So the retention rate is also a strategic goal. But in 2023, we actually was well above the 2024 target of retaining 85% of our employees. Now, we maintain our long term Accelerate 25XL goals. We've invested significantly in transforming the organization. And we've also digitalizing key business processes in order to be able to sustain this profitable growth. In 2024, we're actually going to continue investing in business development in order also to boost our organic revenue growth in 2025. And we also have a growing pipeline of potential acquisition targets, and we expect to complete at least one acquisition before the end of 'twenty five. So those were the main highlights from our presentation today. So back to you, Matthias. Thank you so much, Mikael, and I will start off the Q and A. You mentioned right at the end that you're digitalization by yourself. You live as you learn. Well, we take our own medicine. And for us, in order to be able to continue the growth, you know, we need really to have full control of all the key processes, both in order to be able to grow in a good way, but also in order for us to be able to keep our cost level in check so that we can grow our billable side of the business faster than the overhead in the business. Yes. And you state in the CEO note as well as mentioning in the presentation about resilience during 2023 when there were the interests were high and the inflation was very high. Could you elaborate a bit on how this was being made? Well, we were all year, we were looking into our cost base in order to make sure that it matched the revenue base of the company because we are very, very focused on making sure that our margins, our EBITDA is still very positive, although the market conditions were definitely very uncertain during the year. So it is a testament that we actually have such a nice EBITDA under such conditions because the geopolitical situation is really challenging. And we also have very high inflation rate that has driven up the interest rates and a lot of companies are holding a little bit back on investments in digitalization at the moment. But of course, that is also going to get to an end because now we see inflation coming down and interest rates are also coming down quite fast. So you're confident that those factors will drive more business for you? Yes. We still see 'twenty four as being there are some uncertainties still out there. But as we approach 'twenty five, I do expect that the situation is going to improve. And clean energy seems to be your golden egg here. How will you maintain the growth and what are the main drivers here? Well, clean energy is a business area that is growing really, really fast. It's a focus area worldwide And we have really gone in and trying to join that growth wave with big success. So we are in different areas of the energy business there. We are both helping clients developing energy trading platforms, which are getting more and more complex as you have to handle this sustainable energy from wind and sunshine, which is very, very difficult to predict. It can also be in battery technologies, you know, for electric cars, where we are helping a client develop software solutions and quality ensure products that will help big manufacturers like, for instance, Audi in creating great electric cars, right? Yes. And when it comes to your the share of your international of your revenue is international these days. Could you elaborate a bit on how this will continue? As part of our strategy, Accelerate 25XL strategy, we actually has one of the growth paths is growing the international sales. And we've been growing that quite well in the last few years, coming down from the Danish part of the business has come down from 71% back in 2020 to now, it accounts for 46% of our total business. Now Denmark is our home market and it's still important for us, but we see great opportunities also to grow outside of Denmark. And we've taken pursuing that opportunity there. As we also do acquisitions, there's also a pretty big possibility for us to actually gain clients outside of Denmark in this kind of acquisition process. Okay. So what kind of companies and what areas, geographical areas are you looking for? We have multiple parameters that are important for us in acquisitions. And one thing, of course, is to gain new clients as part of acquisitions, but we are also very much looking into acquisition targets that can also give us sourcing locations outside of Romania, because today, all our development centers are placed inside of Romania. We'd like to have locations other places as well, also as a part of a de risking of the business in general. So we are looking at countries that are not too far away. So it's not Far East or areas like this that we are looking into. We are closer to home. Yes, thank you. And how confident are you that you will reach your Accelerate 25XL strategy goals that you set up? Well, we are continuing towards that path, and we do need to do acquisitions as part of this growth path here. But as you saw back in 2021, when we did the acquisition of Corebuild, well, that year, in 2021, we grew the revenue, I think, by 60 some percent. And in 2022, we grew by 45%. So we are taking these big growth steps as we do the acquisitions. Thank you. And what are the main reasons that you bring ESG into the report? Well, it's in the time, right? We all have to be careful what happens in the world here. And besides, of course, you know, wanting to do more for the sustainability in the world, we also see an actual business opportunity inside of sustainability, inside of ESG. So one of the things that we're actually looking at right now is, you know, we are in our business right now, we have a lot of focus on what we call clean code, making good code that is easy to maintain and read for the clients. But we are also looking into, can we also form this into an opportunity, for instance, in Green Code, where we are also thinking about how can we optimize the Code that we deliver to the clients in such a way that they can actually save energy by doing the calculations more optimal than has been done maybe historically. So we see both business opportunity as well as being good to the environment and to our people as well in there. And it's also a requirement that we actually by the time we go onto the NASDAQ main market, we also need to implement the CSRD sustainability standard. Okay. Thank you. And when it comes to risk mitigation, what measures do you take in these troublesome times of ransomware and other threats? Well, this has been a big issue for many companies, right? Maybe Wirtgen is still so small that we are not such a big target yet. But what we do is, you know, we have regular penetration testing of our IT systems in order to ensure that it's very difficult to get inside of our our systems. And so far, this has worked. We have not had any successful attacks of our IT systems this far. Yes. And if we move to the company, you have strengthened the board with 2 people, 2 persons. Who are they and what will they contribute with? Well, one of the persons is Martin Dommerbuech Kristansson, who also has a history inside of sourcing, outsourcing business. He's built up, successfully built up outsourcing companies before. So he's actually coming in and complementing the board well within our really understanding our business area. He's also really, really good on the commercial side of business. So he can also help the board inspiring with management concerning commercialization. We also added end of last year, Jani Nielsen, who has a background that will help us for the corporate governance side of the business as we go forward towards the main market. Sounds great. And finally, what could investors look forward to in the news feed from Vertech during 2024? You'll just have to follow us and go in and sign up for our newsletter because, of course, I can't tell you since it's not public information yet. Okay. Thank you so much, Mikael, and good luck going forward. Thank you very much.