Report 2024 with CEO Michael Aaen. Before I hand over the call to you, Michael, I remind the audience that you can write in all your questions in the chat. We have already received many questions, and I'll make sure to ask all of them to Michael after his presentation in the Q&A session. As you can hear, this presentation will be done in English, but please feel free to also ask in Danish, and then I will do my best to translate them to Michael. With that said, Michael, I will hand over the call to you.
Thank you, Kasper. My name is Michael Aaen, and I am the CEO of Wirtek. Next slide, please. First, a short overview of Wirtek. Wirtek is a Danish IT company, and we were established back in 2001 as a spinoff from Nokia. Wirtek, we've provided high-quality IT services to our clients during the past 24 years. Back in 2006, Wirtek was listed on NASDAQ First North Growth Market as, I think, the third company in Denmark. As far as I know, we are the only one from back then that is still on First North in Denmark. In 2024, we grew our clean energy revenue by 84%, but I'll come into this a little more later in my presentation. Last year, we concluded two acquisitions: Pragmasoft in Portugal and Seluxit in Denmark.
Wirtek, we are headquartered in Aalborg in Denmark, and we have two development and test centers in Romania, one in the northern part of Romania in Cluj-Napoca and one in Bucharest. Through the acquisition of Pragmasoft, we actually now also have a development and test center in Portugal. Next slide, please. This morning, we published our annual report for 2024, and I want to present a few financial highlights from this report. In 2024, we delivered a revenue of DKK 71.9 million. It is a growth of 2% compared to 2023. Our EBITDA was DKK 5.2 million, which is 17% below 2023.
However, if we look at the two acquisitions we did in 2024 and actually adjust for the one-time costs we had in relation with those acquisitions, we obtained an adjusted EBITDA of DKK 6.2 million, which is actually in line with the 2023 EBITDA. Earnings per share last year was DKK 0.28 per share, which is down 47% compared to 2023. If we look at the right side of the slide, our EBITDA margin in 2024 was 7.3%, while the adjusted EBITDA margin increased to 8.7% compared to the 7.3%. Despite the acquisitions of Pragmasoft and Seluxit in 2024, we actually have an equity ratio remaining very strong at almost 52%, and the liquidity ratio is also very solid at 135%.
If you want to put this a little bit into perspective, when we did our CoreB uild acquisition back in 2024, sorry, 2021, we actually had an equity ratio down to 35% and the liquidity ratio at 96% at that time. I am very pleased with the numbers for 2024. Next slide, please. As a Danish, sorry, I think we actually need to go, sorry, I was a little bit too fast there. As a Danish company, we have always focused on ensuring a solid client base in Denmark. In 2021, we actually made the strategic decision to also start growing more internationally. If we look back at 2020, we generated something like 71% of our total revenue from clients in Denmark.
Here in 2024, our Danish clients account for 47% of the total revenue, while the U.S.A. accounts for 26% of our revenue and the Netherlands for 17% of revenue. Through the acquisitions of Pragmasoft last year, Portugal now provides 5% of revenue, while the remaining 5% came from clients in Austria, Romania, as well as the United Kingdom. On the right side of the slide, we show the revenue and EBITDA development during the past five years. Revenue has grown each year, even during COVID lockdown and during the last couple of years with high inflation rates and geopolitical uncertainty out there. EBITDA has been negatively affected during the past couple of years, but if we look in 2024 at the adjusted EBITDA, you know, then it is actually in line with 2023. Next slide, please.
The EU has set some very ambitious and legally binding energy efficiency targets through the Energy Efficiency Directive. This requires massive investments in Europe into renewable energy sources like wind and solar and in infrastructure and IT systems that actually will be able to handle an increase in variability in the energy production. Because, as you know, society, we actually need to function even when the wind does not blow or the sun does not shine. In Wirtek, we actually saw this transition of the energy sector as a significant opportunity back in 2022. We made a decision to actually put focus on clean tech opportunities at a time when we already saw some geopolitical uncertainties out there that have started to put pressure on other business areas. This has paid off big time for us.
Our energy business actually grew by 84% in 2024, and it has grown from being our smallest business area in 2022 to now actually being our biggest business area, accounting for 34% of total revenue. Next slide, please. As part of our growth strategy, Wirtek pursues strategic acquisitions that will support the future growth of the company. In 2024, we concluded two acquisitions. In August last year, we acquired Pragmasoft. It's a Portuguese IT company with a focus on the clean tech sector. This acquisition supports Wirtek's existing focus on clean tech, but it actually also helps us expand our international footprint. We actually also achieved one of our strategic goals of providing our clients with multi-sourcing capabilities. I could put a check mark on that one there, now being able to support clients both from Romania as well as from Portugal.
In addition, Pragmasoft has also actually developed the Solar Tech product portfolio that will support Wirtek's change in strategic direction, which I will actually talk a little bit about a little later here. Now, in July last year, we actually also acquired the assets from Danish Seluxit, and we hired at the same time key Seluxit employees. Seluxit has actually developed an impressive and robust IoT platform that supports solutions for renewable energy as well as wireless communications. Seluxit provides Wirtek with the foundation for actually building solutions that can scale through recurring revenue streams, both from SaaS, software as a service product solutions, as well as from hardware deliveries. The addition of recurring revenue streams will support higher margins in the medium to long term, although it will require for us to actually invest in the short term. Next slide, please.
As I mentioned before, at Wirtek, we are changing strategic direction. We have seen significant global changes and market shifts during the past couple of years, and this has actually led to many companies delaying investments in IT projects. As a consequence, Wirtek has chosen to augment our existing services model with a new solutions model, actually being supported by our acquisitions of Pragmasoft and Seluxit. Those two models are fundamentally very, very different. Services is an area that is very resource-intensive, and it actually requires consultants to deliver all the services. Scalability can primarily happen by adding more consultants into the picture. Solutions, on the other hand, allows Wirtek to scale the business through recurring revenue streams from software as a service solutions as well as from hardware deliveries.
In order for us to actually address the unique requirements of these different business areas here, we've established two new divisions from January this year, services and solutions. I'll now dive a little bit more into each of these two divisions. Next slide, please. The services division represents Wirtek's existing business model. Now we have streamlined it, and we've taken our existing five business units and pulling them into three business units now that are very sharply focused on segments with high growth potential. We have also expanded our geographical reach through the acquisition of Pragmasoft, as I said before, actually now being able to support our clients from both Romania and Portugal. One of the business units, energy, is our largest business unit in services.
We will continue leveraging our deep knowledge of the energy industry to actually continue growing this business unit. Wireless communication automation, another business unit, will leverage the rising demand in connected devices and smart systems. We actually do expect that this business unit will work closely with our solutions division in order to capitalize on these strong IoT capabilities that we acquired from the Seluxit acquisition. The last business unit in this services division is X-Tech, sorry, and it will explore opportunities in emerging technology areas in order to support the ongoing digital transformation all over the world. Just the next slide, please. I have here one of the clients in the services division. This is a company called Efacec.
The company is headquartered in Portugal, and it operates in 84, sorry, 87 countries around the world, and it's focused on energy and mobility solutions. Now, Wirtek actually gained this client relation through our acquisition of Pragmasoft. And the partnership between Efacec and Pragmasoft has actually now lasted more than 15 years. And we have six active projects with this client supporting clean energy transformation. The big important thing here is that this client partnership actually demonstrates that Wirtek is very focused on maintaining long-lasting client relations, and it's in line with how we also treat our existing clients in the organization, in the services business there with long-term relations, often accounting for more than 10 years. Next slide, please. Now, the new solutions division, it complements services with scalable products and platforms.
Now, scalability will happen both with annual recurring revenue streams and from software as a service solutions as well as from hardware deliveries. Now, market validation has actually already happened since we have closed major orders from clients during the second half of last year. We have chosen to focus our efforts into three business areas here. Based on a solution that we are actually currently delivering to Port of Aalborg, we will provide a tenant consumption management solution to owners of multi-tenant buildings. This solution streamlines billing and administration while adhering to the EU's energy efficiency directive. This is actually quite important because as of January 2027, providers of tenants in multi-tenant buildings actually have to be able to provide detailed billing information to each tenant on a monthly basis, which our solution, of course, supports.
Now, the second business area is focused on solar tech products, allowing clients to actually easily manage and maintain solar farms. The third business area provides solutions based on the advanced IoT platform that we acquired from Seluxit. Although I cannot name the specific client, one of the contracts that we signed during the second half of last year was a significant solution with custom IoT hardware and a software as a service platform integration as well. This solution will actually generate recurring revenue both from hardware deliveries as well as from the software as a service platform. Next slide, please. One of the clients we have in solutions is a Danish company called Pilar. It is an innovative company that provides screw pile technology to significantly reduce CO2 compared to traditional concrete foundations for buildings.
Now, Wirtek, we're delivering an IoT solution that allows Pilar to actually monitor and collect critical data in some very tough environments out there. Now, Pilar's product supports the EU's aim to actually achieve fully decarbonized building stock by 2050. A study has shown that Pilar's screw pile technology actually achieves an 85% reduction in CO2 compared to normal concrete foundations, which I think is actually quite remarkable. Next slide, please. Lastly, I want to present Wirtek's outlook for 2025. With the increasing geopolitical uncertainties that impact decision process with existing as well as potential new clients, we actually project conservative revenue next year for this year in the range of DKK 70 million-DKK 75 million. This amounts to a growth of a negative 3% to a positive 4%.
Now, in 2025, we will continue to invest in business development that we started last year in preparation for a rebound once markets either adapt to new levels of uncertainty or hopefully there will be a reduction in the level of uncertainty out there. Now, in addition, Wirtek will invest in leveraging the products and platforms from the Pragmasoft and Seluxit acquisitions in order to build a strong solutions division. Of course, these investments in the short term will have a negative impact on our profitability with the expectations that growth in both revenue and profitability will increase significantly in the medium to long term. With this in mind, we project an EBITDA in the range of DKK 1 million-DKK 5 million in 2025, which amounts to a negative EBITDA growth of 81%-4% this year. I guess this concludes the presentation. Last slide, please.
Thank you for watching, and I'm ready for some Q&A now.
Yes, and thank you for the presentation as well, Michael. Let's take the questions. We have received a lot, so I'll try to collect them and take them not one by one, but at least I'll try to cover all of them. If we start with the guidance where you ended this presentation, Michael, you said yourself that this guidance is considered to be conservative due to the uncertainty that you're seeing in the market right now. We have a question that could be related to this because there's a question here saying how much of the current revenue guidance is covered by existing agreements and new orders? Is that higher than you normally see this year because of this, you can say, conservative guidance?
What we've said historically is that in our services business, when we start a new fiscal year, we've got about 80% of our revenue in place. Actually, for this year, I think it might even be a little more than 80% of the revenue base in place here because of all the uncertainties out there. It is harder right now to generate growth in revenue when companies are sitting back and waiting for what happens next month, right? There's a lot of uncertainty, especially driven by the US right now. Who knows where we end up with that?
Sure. Talking about US, we also have a question here. It says that U.S.A. marks a good portion of your sales, and you mentioned it was 26% in 2024.
The question is, do you see greater risk here with the new tariffs, and how do customers see this situation?
The majority of the revenue we are generating from US clients is actually delivered to their clients inside of the EU. Not a small part of that is actually also in the energy business area there. I do not foresee a significant impact in the short term. Again, all companies out there can be affected by tariffs that will increase prices on products that might eventually have our clients' clients reduce their demand for services. It is really hard to predict this change here. I do not think that our U.S. clients as such are that impacted. I see the challenges with business in general out there because everybody could potentially be impacted by this.
If we look at the energy sector specifically, we have some tough targets in the EU that need to be adhered to. As you just saw, just Germany the other day, was it yesterday, has put a big package, also put into the renewable energy sector there. I do not foresee that there is going to be a big pressure on the energy sector as such. Other industries for sure can be impacted here.
Yeah. In regards to one of the other questions, can you maybe dig a little bit more into this 2024, you can say, guidance where you do not expect that much growth, at least the range that you have right now in terms of why is that and to expect these newly acquired companies to contribute to the revenue growth later? Or why do you not see this effect coming here in 2025?
Yes, if we talk about the guidance for 2025, the range on revenue is put around approximately around where we actually ended up in 2024. Yeah, we did some acquisitions, and of course, we get some revenue from those acquisitions. At the same time, we've also lost revenue from existing clients simply because it's hard out there for them as well. They've had to reduce business from that side. It kind of balances out there.
All right. Okay. If we continue to one of the other parts regarding the employee growth and also the staff cost, you can say, first of all, do you expect organic employee growth in 2025?
It's hard for me to say exactly if it's going to be bigger or smaller by the end of the year. I could imagine it probably could be a little bit bigger.
As I see it moving forward, since we now have also a new solutions division where headcount growth is definitely not what is going to drive that business, but more growth in recurring revenue streams there. The metric of headcount becomes less significant for Wirtek as a whole in the future. In services, yes, of course, it is still going to be driven by the number of headcount we actually have delivering services to the clients there. Since the revenue prediction for this year is quite in line with what we had last year of actual revenue, I do not foresee big changes in headcount this year.
Okay. Got it. I do not expect you to guide on this, but we have a question here in regards to the billable percentage. What do you expect in 2025?
As far as I remember, if I correct, sorry, then the billable percentage was about 85% in 2024, down from 91% in 2022. Maybe you can set some perspectives on how is this expected to development at least in 2025?
We started back in 2021, 2022 to actually invest in the future growth. We had no idea where the world was developing at that time, right? We started building up an organization that actually should be able to support us from being a couple of hundred people to being a much bigger company in time. That requires you doing organizational building in the company. In principle, we can support a significant growth in billable headcount now without requiring significant changes in the organizational structure in the overhead part of the company here.
We do not want to make short-term optimizations that could hurt our ramp-up growth again once things start to stabilize out there. Yes, percentage of billable is lower right now than it was a couple of years ago here. We do expect that this will improve over time. Again, as solutions will start building up over the coming years here, this metric is not going to be so relevant in the future. We actually would want to have less growth in people, headcount, to generate higher revenues from recurring revenue streams, of course.
Yeah, sure. Makes sense. We also have a question regarding the share buybacks. The question is whether you will do the share buybacks in 2025.
We have an earnout payment for Pragmasoft happening this year for the 2024 earnout.
I could easily envision that we would actually go out and buy the shares in order to deliver those shares to the sellers of Pragmasoft in order to not take further dilution to existing shareholders.
Yeah. If I could broaden this question a bit out, what is your considerations regarding the share buyback versus your dividend payouts? Because you reduce your dividends a bit this year, or at least you expect that. What is your thoughts about maybe introducing a share buyback instead of paying out dividends?
We do a combination here. We are reducing our dividend payments this year, but then also combining that with some share buyback in order to not have to issue a lot of new shares to pay back an earnout. There is a combination there.
Actually, we provided in the annual report in the shareholder information section, we actually describe the new capital allocation policy that Wirtek will follow from now on.
Yes, perfect. All right. If we move to some of the other questions, I think we have a very specific one here regarding the acquisition of Seluxit. The question is here, Seluxit had a technology that could monitor defibrillators, so you could see whether it worked or not. The person asking here this question states that a corporation was established with Telenor and the Danish Heart Association, Hjerteforeningen, and the potential here may be very large as England after Christian Eriksen's heart attack in 2021 immediately installed 50,000 additional defibrillators. Yeah, the question is whether Wirtek today is working with this technology or have you acquired this asset?
I'm aware of the project that was concluded.
I'm also aware that the business case was actually not that solid at that time, at least that's the information that I've been provided with there. Actually, this platform from Seluxit has so many opportunities here. We actually have had to do some important prioritizations here. This is not part of the prioritization we've actually made here. We want to make absolutely sure that there is a recurring revenue possibility in the backend platform to actually storing a lot of data. This solution here does not sound like it's one that actually has this potential scalability as part of it. Of course, you're scaling on the hardware side, but there's not really a lot of data potential for scaling there.
At least from the outside, it seems like it doesn't fit into the new strategy, right?
It is with the business unit, so that makes sense. All right. If we move to one of the next questions, is AI capable of doing coding? Or as AI is capable of doing coding work, will service business also end up being scalable? That is the question.
As I see it, AI is really, really important. Our developers have already started to use it in their day-to-day work. AI is here to stay, right? It is going to help increasing productivity significantly for people out there doing programming, doing other kinds of development tasks in our industry. The importance here is that we need to embrace this technology and help our clients become even more successful because that is how we can maintain the growth in our industry here.
I do not think that AI is going to replace developers, but I think developers embracing AI are going to replace developers that do not, right? It is going to be really important. In services, it is something that can help us help our clients become even better in their products. In solutions, I see AI as an important part of integrating it in the solutions we are going to provide to our clients there because the solutions we are working with are actually collecting huge amounts of data there. You can use AI to do some very interesting things with this data.
Yeah. What is your feeling here? Do you think that you actually invest more in AI than your peers?
We do not account for this specifically in our financials or anything like this, but we are definitely embracing it at all levels of the organization.
Makes sense. Okay. We have some other questions related to the midterm strategy. Any news here? We also have a question asking whether the growth story in Wirtek is over. Maybe you can elaborate a bit on this.
There are hard times out there right now, no doubt about it, right? Yes, the uncertainties out there are enormous right now. We do not know what happens tomorrow. Maybe the president of the U.S.A. is going to come out with a new threat tomorrow, right? That does have an impact. Of course, when markets are down, it does impact our business as well.
What we are trying to actually combat is that we're now diversifying our portfolio. Besides having services alone, we now also will go into solutions here. This is a totally different field that allows scalability at a different level. That actually will also reduce the competitiveness in the areas because you have less competitors, for instance, in tenant consumption building. That's a totally different competitive market than in services, where you, in principle, if you are not focusing enough in services, you have potentially tens of thousands of competitors out there, right?
Yeah. In regards to the midterm strategy, can you give us some dates or some quarters where you expect to update this to the market?
Sorry, I couldn't hear the first part of that question.
The midterm strategy, when do you expect to update the market with a new strategy after this?
When we came out with our changed expectations in December last year, we actually at the same time said that during the second half of this year, the board of directors is going to work on an updated strategy. That work is going to happen during the second half of this year.
Perfect.
When we come out with it, I cannot tell you yet. It also depends on what happens out there, right?
Sure. Yeah. Yeah. In the second half, yeah, that's a good answer to the question here. There is also a question here regarding the listing. Do you still target for a NASDAQ main market listing?
Yes, we do. Of course, this has been pushed a little bit out in the future. It does not make sense for us to pursue a listing on main market with our current size and market value.
Perfect. I think we take the last question here. How much of the current, no, sorry, that we got, what explains the strong momentum in the energy business units? I think you covered it well, but the question here regards to or relates to higher energy costs. Does that also have an effect?
The higher energy costs that came on the backside of Russia going into Ukraine, of course, has probably made a speed up in the renewable energy sectors around Europe. That definitely has not been bad for this business area here. It is also us focusing. We have made this conscious decision to focus on energy and have been pursuing opportunities in this business area there that has paid off. Instead of focusing on other places, we chose to focus on energy because that is where we saw the big opportunities.
Yes, it did pay off, yes.
Got it. Perfect, Michael. I believe we covered all the questions. Thank you very much again for your presentation. Also, thank you for all of you listening in to this event. Also afterwards, when we share it. With that, I will conclude this event and wish you all a great day. Thank you.