Good day, everyone, and welcome to Admicom's earnings call for Q4 2024. We have our analysts here in the studio and our investors online, so welcome, welcome everyone. In this session, we will be first summarizing our year of 2024, and then obviously sharing our latest results. After that, we turn our focus into the future and talk about our plans for the coming year. We also touch upon the topic of how we plan on continuing our strategic journey towards the 100 million ARR international company. After that, we will guide you through our 2025 financial guidance, which was issued today as part of our Q4 and annual reporting, and finally we have some time for questions and answers. Feel free to post your answers on the chat already during the presentation. Before we go into today's agenda, I will hand over to our new CEO, Mr.
Simo Leisti, for introduction and his first impressions of Admicom.
Thank you, Satu, and it's great to be here. Hi everyone, hi the analysts in the room, hi all the investors and our shareholders in the meeting, and the whole audience also following this. First of all, I want to thank Satu for managing the transition period exceptionally well. Satu was acting as the Interim CEO, and Satu and the whole team of Admicom did a great job in terms of closing the year successfully. Thank you for that and outstanding job. It's great to be here. I just wanted to first share a few words about myself. I have a 20-year background in technology, digital technology companies in terms of being the Managing Director or CEO for IT and digital consulting, and also in the tech side of the business.
I have been managing for the last three years Futurice with the international role of being the group CEO, and we were helping clients to transform their business with the help of data and AI. And before that, I was the CEO for Fujitsu in Finland and the Baltic countries. And among that role, I was also the head of European ERP business. So ERP business in terms of what value does it bring to our clients is very familiar from that time. And before that, I have been managing both domestic Finnish businesses for Cisco and IBM, and also for Cisco, I was leading the services business across multiple countries in the Baltics and in Denmark as well. So international business, helping clients to drive value from digital technologies, they are very familiar to me.
And many people have been asking me, what's the feeling you have been now starting? So what's the top of mind feeling? My feeling is optimism, and I will be sharing some of those reasoning and drivers for that optimism during today's presentation, but I feel excited. I feel excited about the company, the product portfolio. I feel excited about the team and the potential of the team, and I feel excited about the construction industry and how digital technologies can help the industry move forward and drive value and efficiency. So there's many reasons for being optimistic. And also, I feel quite encouraged by our vision towards the 2030. Like Satu mentioned, we're aiming towards EUR 100 million ARR. So we aim to do that by leveraging our product portfolio across the whole value chain of construction projects and providing ERP capabilities for our clients.
Attached to those products, we have the suite of services that we can use to complement the value add that we bring to our clients. And we believe that connecting those technologies even more by using AI and data capabilities will help our clients to drive more efficiency and improve the productivity. I also believe that we have a potential in multiple markets across Europe, and we're only getting started with the latest acquisition of Bauhub to extend our footprint in those new markets. But also, everything is always up to people. So we have the Admicom community, our employees who have a lot of experience and knowledge from the construction industry, from the problems that we're solving for our clients, and I think there's a lot of untapped potential there as well.
Through all of these, we believe that we can contribute a value add to our clients and help them to perform approximately 25% higher in the productivity and profitability than the peers, not leveraging our technologies and services. It's a bold statement, and it's based on the fact that there's a lot of inefficiencies in the construction industry and the process, how they have been managed. Of course, we can't change the market overall. There's some estimations that up to 50%-80% of the time spent in the construction process are still up for more productivity improvements. We believe that we can influence through our technologies and what we can do at least to half of that. That's the reasoning for the 25% as well.
The goal is ambitious: EUR 100 million ARR. But I feel confident that we can find the ways and the execution roadmap how to get there. We are on a journey. We are on a two-phase strategy journey, and we're now ending the first phase of the journey, which is focused for growth. We have been building our product portfolio. We have been building our capabilities to be able to get to the next level of accelerated growth, internationalization, and for higher value for our clients. If I'm looking at, from my perspective, still being a little bit of outsider, I'm looking at the clients and the industry and also reflecting on some of the recent research that have been conducted by, for example, the Federation of Finnish Enterprises and Verian.
The construction industry is not only lagging behind in the general digital technology adoption, but also now recently in the AI. It was announced in the research, or it was concluded that the construction industry is among the laggards of the adoption in AI. Only one of four companies are somehow leveraging those technologies. And the main issue for adopting those is the lack of AI skills, and actually that's the reason for also adopting the software or digital capabilities overall. So we have to make things easy for our clients, especially when we're looking at our target market segments in the SME-sized construction companies. The announcement of Admicom acquiring Bauhub is larger than the size of Bauhub. It's significantly improving our ability to address new areas and new dimensions of construction projects.
We're tapping into new use cases, helping construction projects to share data more seamlessly across all stakeholders in the construction projects. We're able to bring real-time dashboards and analytics for how the projects are going. We can share documents even more seamlessly. We can provide checklists for, for example, in the acceptance phase. So we are bringing new cases in terms of value add for our clients. And we're connecting new stakeholders also to our technologies. In Estonia, where Bauhub is founded in, they have 300 companies using Bauhub, but they have over 30,000 users for the technology. So we're expanding our user base through the acquisition of Bauhub. And we're planning on bringing Bauhub also to the Finnish market during the early stage of the year this year. And also we have new ways of monetizing our technology for the clients.
Bauhub is priced based on project-based pricing, so we're even creating lower thresholds for our clients to start adopting our technologies for their services or for their use. And also we're challenging new competitors in a different way. We're extending our portfolio to be even more relevant, where some of our competitors have been gaining good market share. So overall, the ERP solutions providing the ease of administrative work, the project management portfolio providing support for the whole project lifecycle, and now Bauhub enabling us to do the overall layer on top of those technologies is a great position for us to be in. And now to Satu and some of the strategy execution highlights from last year.
Thank you, Simo. Looking back a little bit on 2024, it was a year of changes at Admicom, and we also grew a lot as a company. At the same time, we were continuously challenged by the market. The downturn in the Finnish construction sector continued throughout the year. The changes accelerated towards the end of the year with the CEO change and in December finally with the first international acquisition in Admicom's history. And we were extremely happy that we could take the first concrete step out of the Finnish borders with an acquisition that has such high synergies with our current or existing offering, as Simo explained. With Bauhub and also with the new internally developed Quantima product, our project management suite now has all the pieces for an offering to cover all the phases in a construction project.
We are excited to be sharing a little bit more about our project management suite vision later in today's presentation. Last year, we also concentrated a lot in unifying the user experience of our products. We took multiple actions and steps to increase the ease of use and also enhance our cross-sell and upsell potential. With the newly recruited Chief Product Officer, Mr. Teemu Uusitalo, we plan on taking this development further and making sure that the customer centricity is even more driving our portfolio development than before. In the construction sector, we believe that artificial intelligence will play a critical role in increasing the productivity. In 2024, we were able to introduce our AI vision, and also we were able to launch the first AI use cases in our products.
The key differentiator for Admicom in terms of AI is the data that we have available from the 20-year-long history of the company, and with that data, utilizing that data, we will be able to develop products where AI is seamlessly integrated and enables the productivity leaps in the sector. Last year, we also kicked off our own sustainability work. In a year or so, Admicom will be publishing its first sustainability report as part of the 2025 annual reporting. When you look at the industry or construction technology analyst and research reports, the ESG matters play a much bigger role in the construction technology field than we have previously identified. In our own work so far, we have already identified multiple business opportunities in this area, and we plan on developing those further in the coming year.
Also, obviously, we plan on increasing our own or improving our own ways of working and processes also from the sustainability angle. One very important project that was kicked off in 2024 was the work towards a common Admicom culture. Throughout the years, Admicom has grown through acquisitions, and we believe that building a common culture will help us reach our strategic targets in the future and will also be visible towards our customers in terms of a more unified customer experience. In the last quarter, we focused a lot on efforts to build our sales pipeline, and we succeeded very well in this objective. The sales pipeline was at the highest of all of 2024 at year-end. Simultaneously, we did have some inconsistency in sales towards the end of the year.
October was the best new sales month of the year, but November and December were a bit soft in terms or in comparison to our own targets. In Q4, there's typically a little bit of slowness in the new deployments for new customers, but simultaneously, our churned customer amount was less than in previous quarters, and that helped us push the net new logos to a record level in the last quarter. What we are very happy about is the full-year customer churn number, which landed at 5.4. In our own objectives, we were targeting at 6, and we came out well below, so that is a great result. If you look at our Q4 ARR development, you notice, and it was also mentioned in our quarterly release report, that we were not satisfied with the organic ARR development.
That is mainly because of the Ultima ERP customers' contract updates that were a little bit accelerated towards the end of the year. At this point, it is good to remind you of the Ultima pricing model. With Ultima, the monthly fee that the customer pays is based on their revenue estimate. If the revenue expectation decreases or increases during the year, the customer does have the ability to update their contract at any point, basically. Maybe I at the same time remind you of the adjustment fee component. So the monthly fee that is originally based on the revenue estimate of the customer, five months after the customer's financial year ends, we compare the actual revenue against the estimated revenue and then invoice the adjustment fee. That is also recognized at the same time of invoicing.
Our upsell and cross-sell results were decent in the last quarter, but we do believe that with portfolio strategy coming together and with the changes that we can make in our go-to-market model, there's a lot of potential in increasing the upsell and cross-sell potential in the future. And right after the announcement of Bauhub acquisition, we kicked off the integration project in multiple different streams. And today, those streams are working at full speed. And as Simo said, we plan on bringing Bauhub to the Finnish market as soon as possible. The market in Finland is still challenging. In our previous releases and earnings calls, we have been talking about the signals for positive turn in the market. First, it was the soft signals mainly from our own customer base. And more recently, there are more positive signals also in the economists' reviews and in the market in general.
However, the recovery is expected to be extremely slow. The market decline has been significant in 2023 and 2024, and now the latest estimates forecast that the industry will grow 4% in 2025. What needs to be understood is that the comparative figure is so low that 4% is basically nothing, so we believe that at least for the first half of 2025, the market will continue to be challenging. There are a few main drivers for the market's slow growth in Finland, and the main reason is lack of demand. There's also a shortage of skilled labor and some financing challenges that also impact the growth. On the positive side, the interest rates have been moving to the right direction since the summer, and now the latest statistics show that also the prices for apartments are starting to pick up.
These are the kind of changes that the economy needs to boost the overall sentiment and start believing in the market recovery. We have also tried to make sure that our investors understand what the impacts of the soft market or challenging market are for Admicom. Our first strategic phase focus for growth during 2023 and 2024. We have operated in a really challenging market, and we have still been able to grow. I think that that proves the resilience of Admicom's business model and gives confidence that when the market takes a proper turn upwards, then we can also boost our growth with that. The negative impacts for Admicom mainly come from prolonged sales cycles, especially the larger deals are slower to sign. There's obviously more insolvency in the market, which results in churn for Admicom.
For less critical solutions, I'm now talking about other than ERP solutions. There is also more sort of voluntary churn in the soft market. For some of our products, we are also seeing user reductions. As our customers reduce their workforce, it is natural to also cut down the number of seats in our software that they are using, and then finally, what's characteristic for Admicom is the annual adjustment fees mechanism, which I explained, and that is sort of a post-cycle element, so if the market turns in 2025, we should be able to see the impact in the annual adjustment fees in 2026. Having said all of this, our customer base has been performing better than the overall market in general.
We base this on the fact that based on the data that we have available of our customers, we are still seeing a large bunch of our customers growing even in this tough economy. We also have less bankruptcies in our customer base than in the market in general. Now we're going to look a bit more closely at the Q4 and full-year financials. Here we have some of the key figures from Q4. ARR growth, this is also the full-year number, was 9.8%. Bauhub contributed 4.6% on ARR growth. We issued an updated guidance related to Bauhub acquisition in December, and the guidance for our ARR growth was 8%-11%. We ended quite close to the midpoint. If you exclude the impact of Bauhub, we would have still reached our original financial guidance of 5%-10%.
But as we said in our release, we were not satisfied with the ARR growth, and especially the Ultima contract updates during Q4 were something that we were not prepared for. Recurring revenue growth and revenue growth in Q4 were much higher than in the comparative period. Here, obviously, Trackinno has some inorganic impact, but Bauhub was consolidated in the group financials only at mid-December. So Bauhub's impact on revenue and recurring revenue growth is very insignificant. Our Adjusted EBITDA was 28.4%, and that was in line with our own expectations. Compared to the previous year quarter, we did have some investments that were made in 2023 or during 2024 that impacted the EBITDA, but that was basically in line with our own plans. The customer churn we are happy about, as already said, and for the first time now we are able to also show the comparative figure.
We have now been following the same practice in calculating customer churn for 12 months, so in the future, you can also expect to see the comparative figure, and as a reminder, the majority of our revenue is recurring. On this slide, I would like to draw your attention to a couple of things. Firstly, if you look at the Q4 versus Q3, that's a good reminder that at Admicom, the quarters are not identical, and there are two reasons for that. In second and third quarter, the majority of annual adjustment fees are invoiced, and they then boost also the EBITDA. In Q3, additionally, we have the holiday season, which means that the personal expenses are below normal level. Additionally, when you look at the Q4 EBIT, you see a significant change compared to the previous year's Q4.
That relates to the change that we made in the goodwill amortization at year-end 2023. Kotopro goodwill was originally planned to be amortized over 20 years, and we shortened the amortization period to 10 years. That then led to a quite significant additional amortization in Q4 2023. If you look at the full-year EBIT, they are comparable, but the Q4 is not. ARR trend, the Q4 organic ARR growth was only 0.5%, and this is what we are not satisfied with. As said, the Ultima ERP contract updates were the main reason for downsell in our ARR. The annual adjustment fees impact in full-year ARR growth is -2.7% in 2024. Here you have the ARR bridge. A couple of things also from here.
If you look at the net upsell downsell, you can see that our performance on this area was better than in 2023 and in 2022. So we have been better at upselling and cross-selling our products to the existing customer base. The upsell element also includes the price increases that we made this year. Churn in absolute terms decreased by EUR 300,000 from previous year, and that is the reason why also the churn percentage was significantly lower. M&A impact in our full-year ARR growth was EUR 2.1 million, and that is due to Trackinno acquisition in January 2024 and Bauhub acquisition in December. Here we have a couple of donut graphs related to our revenue split. On the left-hand side, you can see our revenue split per solution. And here you can see the inner circle is the comparative year split, and then the outer circle is the 2024 split.
ERP solutions are about three quarters of the total revenue. There's two percentage points decline from previous year, and that has basically gone to the fleet management, meaning Trackinno. Then on the right-hand side, you have the split per sort of revenue stream. SaaS contributes about three quarters of our total revenue, and recurring accounting services is about 18%. Non-recurring services are about 6%, and that also includes the external software development services that we have been selling to our customers since Aitio acquisition. And 2023 and 2024 are pretty much identical in both of these graphs. Admicom has a really strong balance sheet, and we have a solid cash flow. Net debt at year-end was minus EUR 5 million. And considering that we paid EUR 6 million of Bauhub acquisition with our own cash reserves, you can see that the cash flow has still been strong in the last quarter.
On the right-hand side, we wanted to showcase the R&D capitalizations. That is something that we get asked a lot. In 2024, we have been capitalizing more than in 2023 and in the history in general. And this is due to the fact that our R&D focus has been shifted towards the new technologies and new products: Quantima, Tempo, AI development. Those types of activities we are currently capitalizing. But still, compared to some of our peers, we still reflect the majority of our R&D cost in the profit and loss statement. And now I'm giving back to Simo for his expectations for this year.
Thank you, Satu. Let's go to this year and what we're expecting to see and what we are focusing on. So we are now at the stage of transitioning to our next strategic phase.
We are starting to build our expectation or direction towards becoming the first choice of our partners in the European construction software ecosystem. We're also planning on now ramping up our acceleration execution plans. My first task as the new CEO is to make sure that we're solidifying those plans and we're making it as quickly as possible to have the right focus, reshift our resources to the places where we expect the accelerated growth to come from. A few words about that in more detail. First of all, there's many questions about why are we envisioning Admicom to be an international player. If we look at the Finnish total addressable market for both our software and for our services, we have still room to grow.
We are not stopping or somehow starting to defocus from our domestic market, Finland, but we are absolutely focused on driving the growth with the help of acquisition of Bauhub, with the help of investing into our product portfolio, and then also making sure that our Finnish customers are getting the full benefit of our products and services. But of course, when we're looking at the potential in the European other markets, we have been doing research over the past year in terms of understanding the potential, understanding what it would require for us to move into those markets. Of course, the multiples in the total addressable markets are very, very significant. We do feel, and we have evidence from the Swedish market with the client successful onboarding as well, that our portfolio is fit for purpose. It has a great market fit also outside of Finland.
We are determined in terms of opening new markets and building our internationalization playbook during the year. When I'm looking at the market and more specifically the different client characteristics, why we're speaking about having the focus in the SME market space. This is a research conducted by Gartner where they were asking from construction software buyers, what are you looking for and what were the characteristics of those companies looking into construction software. We're able to see that a significant majority of those companies are very small. Admicom has the vision of helping our clients in terms of bringing technology architectures and platforms to help clients to really take the full benefit of that, making it easy to onboard the clients to that platform and helping specifically those small and medium-sized clients to really take the benefit of higher productivity and efficiency.
That is the market where the most potential is in terms of the user space, and also we're focused on building our capabilities to match that client segment requirements. But we will be making more detailed client segmentation and target client characteristic plans during the beginning of the year. And what are the clients looking for? So three main points came out from the Gartner study. First of all, enhanced project management. Whether it's a research done in Finland or more broader international research, the main point what the clients are looking for is around enhancing the project management efficiency, making sure that there's a seamless information and data flow across the whole construction project, and there's limitation for different kinds of human errors and inefficiencies.
If you wonder why we're so focused on the project management suite of our products, the reason is that the most demand from the client side is in that area of their operations. Of course, also we're looking into overall operational efficiency, including also the back-end administrative work with the ERP solutions, but we want to make sure that we're driving the automation in the portfolio further during the year and during the next accelerated growth stage of our journey. It means that we need to build more seamless data platform and integration into our platforms, and we need to bring more AI-based capabilities to help in automating different stages in the life cycle of the projects.
The last point is to drive for more collaboration, drive for more communication across all the stakeholders, and of course here, Bauhub is a great fit for that client demand that we see. We're building the vision for more comprehensive platform-based architecture and technology portfolio that we can offer to our clients. The different product components that have been now built across our own R&D investments and capabilities, but also through acquisitions, we will start now more and more looking into that as a seamless platform, seamless data flows, seamless integration across the whole life cycle of the projects. We are connecting new stakeholders to our platforms so that more and more users will start to see Admicom as they are managing the projects and they're participating in those in different roles.
So both we're extending our capabilities in terms of the users who are using Admicom products, but also in terms of the breadth and the depth of our capabilities. And now when we're transitioning to this phase of accelerated growth, of course it's time for clarifying also the execution roadmap. So during the beginning of the year, I will be working very hard with the leadership team of Admicom to make sure that we have the solid execution plan how to get there. The what part is to me very clear, what we want to become and where we have the opportunity. The how part is now where we're focusing on, how to build the roadmap, how to build the execution plan so that it's solid and we have all the capabilities to execute it successfully. And it requires focus.
So to me, strategy is always about making decisions of focus. So we're going to make focus around our target markets and our target client types. How much are we focusing on what markets and what is our strategy for those new market and new client segments? We're going to invest into our improved product market fit. So you can see from our plans for this year that we are investing quite heavily into our R&D capabilities. And for example, the Bauhub acquisition was predominantly R&D-focused people. So we're looking into our portfolio and we're realigning our efforts in terms of making sure that we're developing a good product market fit into the markets where we select to go. And then we need to accelerate the speed, not only accelerating the growth, but we need to accelerate the speed within Admicom as well.
So we need to make sure that we have the leadership systems in place. We have the ways of working in place that allows us to react quicker to the market changes. If they're starting to pick up, we're ready to execute in a more swift manner. So we need to make sure that we are culturally and management system-wise ready to execute things at a higher clock speed. And here are some of the, let's say, more detailed highlights. So first of all, I have defined a 60-day plan to clarify our execution status. So I discounted myself with 40 days. So I only give myself and the leadership team 60 days because I feel like the direction is very clear and the target where we want to go now is more the question of solidifying the execution plan, how to get there.
So we're doing that during the Q1 as well as, of course, executing our existing business and really focusing on the sales and marketing to drive the accelerated growth. We are doing reallocation of resources, so meaning that we're not planning on adding substantially more people to our organization. We are a little bit overinvested in certain areas, so it's a great opportunity to do a little bit of reallocation of the resources into the places where it makes the most significant gain for our growth and accelerated growth. And like I said, we are looking into moving into more integrated platforms in terms of the product management, project management, and the ERP capability so that the buying from the customer side is easier and the cross-sell and upsell opportunities are more product-led growth driven than maybe in the earlier stages of our strategy.
Also when looking at the AI and data-driven capabilities, we are very, very focused on driving that development very customer demand-driven, so the first pilots and MVPs that we are now building and some of the first capabilities we have in production is based on the customer demand that we have been capturing from the market, and that we're planning to drive so that we're not putting our efforts into investing things that don't really have a demand in the market and don't add value to our clients, and like mentioned, doing necessary changes into the leadership system so that we're more agile, we're more lean in terms of reacting to the market opportunities and making sure that we're putting the efforts into the right places and leadership focus into the right places that drives our accelerated growth moving forward.
Like I said, like Satu mentioned, also the highlights from 2024, the journey will continue in terms of developing the one Admicom culture. A lot more emphasis in enabling and empowering our people to really give their full potential for our next stage of growth. Speaking about Admicom community, our people, you can see from the graph that we have increased the number of R&D capabilities. This is an intentional thing for us to do. We're really now capturing our full breadth of R&D people, also taking some of them away from the external work that they have been conducting to focus on our internal capabilities, making sure that we're making progress in the areas where we need to do to enable the accelerated growth.
We have surpassed the headcount of 300, although it does include some of those long-term leaves and unpaid leaves, but still it's a milestone for us that we're now over 300 people. Now we need to make sure that all the 300 people can really contribute in the places where it makes the most impact, and 20 of those came through acquisitions and like mentioned, especially in Bauhub, since the technology architectures are very similar to our existing and newly developed products, we can cross-utilize also those in terms of accelerating our R&D activities. We had some gaps in our sales resourcing against our plans during the end of year. All of those sales-related resources and headcount places have been now filled in, so we are truly ready to go for the new year.
We have a motivated team based on our research and based on our surveys that we have been conducting, but my aim is to get even more energy out from the Admicom community and the people so that we are able to show also an improvement in our employee NPS moving forward. Now to financial outlook for this year and to Satu.
Thanks, Simo. Maybe the topic that has the most interest from our investors in today's session. Today, this morning, as part of our Q4 release and annual report, we published our financial guidance for 2025. In 2025, we expect our ARR to grow 8%-14%. We expect our total revenue to grow by 6%-11%, and we expect our adjusted EBITDA to be in the range of 31%-36%. There are multiple themes affecting our 2025 guidance.
Let's talk first about the wide range in ARR growth. As said, the market is expected to improve, but there's a lot of uncertainty about the speed of recovery and how that recovery touches upon our customer base. So that's the main reason that we have chosen to give quite wide range for ARR growth, and should we have more detailed information during the year, we can then maybe issue a more detailed guidance as well. The ARR growth expectation is higher than we had in 2024. As Simo said, we are now transitioning towards the accelerated growth phase. We have made investments into our sales and marketing and our customer experience. So we do expect that our opportunities to sell to new customers, but also to improve our results in upsell and cross-sell are better with improving market than they have been in the past.
We will also internally be a lot more focused on net revenue retention this year, and we will make sure that all the parts of the organization that have ability to contribute to improving NRR will be doing that and incentivized for that. With the improving market, we do expect churn and downsell to improve, but we have taken a cautious approach in that, and in our own estimates, we have taken a quite moderate reduction estimate. With Bauhub, there's one dynamic that needs to be understood. So when Bauhub was acquired in December, we have full Bauhub ARR for 2024 in our ARR calculation, but we only have half a month of revenue. So in our revenue growth, there is a minimum 4% impact from Bauhub acquisition. And now you might wonder why the low end of the range is 6 if Bauhub alone contributes 4.
The reason for that is that we have two sort of one-off impacts reducing our revenue growth. So firstly, we expect the annual adjustment fees to further decline by EUR 700,000 in 2025. And additionally, when we announced Bauhub acquisition, we also announced that we will be moving our R&D people from external projects to internal projects. And with that, we expect the revenue to decline by EUR 500,000. So basically, these two offset the full impact of Bauhub acquisition, meaning that our core organic software and accounting business needs to grow by 6% at minimum. On the profitability side, the slowness in market recovery will challenge our top-line growth and obviously will then have an effect also on the profitability. The one-off items, annual adjustment fees and reduction in external software development revenue will have almost direct impact on our EBITDA.
Also, Bauhub was acquired with lower profitability than Admicom's profitability in Finland. And there are investments that we need to make in order to integrate Bauhub into our platform and also launch Bauhub sales in Finland. And additionally, as last point, we have still been in an investment phase in 2024, and those investments will now be fully in our cost base from 2025 onwards. Our plans of securing the EBITDA relate to reallocation of resources, as Simo mentioned. We will continue to be very cautious about new recruitments, and instead, we will make sure that we have adequate resourcing in the activities that we believe will be boosting our growth in the future. And obviously, we will continue the cost management, which we have been really successful already in 2024 and earlier in the company's history.
The adjusted EBITDA range 31-36 is well in line with our plans, with what we had planned for the transition phase, so no negative surprises at our end on that, and now back to Simo for the final words before Q&A.
Yes, so like I said in the beginning, I feel very optimistic. There's a lot of work in front of us, but we have a great foundation to build upon, and we believe that moving into this accelerated growth phase is going to provide exciting opportunities for Admicom, for the Admicom community, the people there, but also, of course, value for our investors and shareholders. There's a huge long-term potential in construction tech. There are significant market potentials also outside of Finland, but also just in Finland domestically, and we now have built a comprehensive platform and suite of products that we can leverage.
Now it's a more question of how do we translate that into a more unified experience, more unified platform for our clients, enabling more easy up and cross-sell. We have solid financials. We have plans that are slightly more in the investment side for this transition period, but we are truly, truly confident that we can convert that into higher profitabilities as we start to capitalize on the higher growth rates. So it's a great privilege to be here. It's been an exciting first earnings call, and we're now ready for questions. Go ahead.
Okay. Hello. Does this work?
Yeah, it works.
Okay, perfect. Yeah, so my name is Jukka-Pekka Pesonen and I'm from Nordea. Thank you, Simo and Satu, for the great presentation. First of all, I would like to ask you. You told about the sales pipeline getting better towards the end of the year.
So what's the overall sentiment going forward with the customers, and is there material difference between customer size classes, for example?
I think there's a difference when it comes to the different parts of our portfolio. So for project management technologies and products, we have more broader range of the client size. And in the ERP, we are still very much in a sweet spot when it comes to small and medium-sized companies. And the pipeline build is quite well across our portfolio as well. So during 2024, we have been even more moving into a one single sales unit where we're assigning our salespeople to look into the cross and upsell opportunities. So through that also, we're expecting that the average deal size will be increasing.
Pipeline comes from kind of like finding new clients, finding new opportunities, making them bigger with a more broader portfolio, and also looking into the existing clients so that we're able to continue with the up and cross-sell. Like Satu mentioned, we have not been satisfied with the results in that front. There's a question also online about the up and cross-sell, that how many clients are using multiple of Admicom technologies. The percentage is still too low. We still have a lot of room for improvement to make sure that the clients are using the whole platform capabilities of ours. And this is why also the product strategy moving forward is more platform-based to enable the more seamless use across the portfolio.
Thank you. Second question on the, you said that the Bauhub solutions will be launched in Finland as soon as possible, but how about vice versa?
So Admicom solutions in Estonia, do you have a timeline for that?
First priority is to get Bauhub solution to Finnish market. That's the first priority because Finland, as a total addressable market, is more significant. We think that we can be slightly, in a way, disruptive in the market launch as well. That's why we want to accelerate that. But we are also, of course, investigating the existing market potential in Estonia. And for us to start systematically moving into more international market expansion and more to international clients, we're also using most likely some of our, let's say, neighbor countries in terms of building our go-to-market playbook to understand what it takes for us to bring our technology to the new markets as well. So most likely in the execution roadmap, we will be looking into the Estonian market and the cross-sell opportunity there, definitely.
Thank you. A couple of questions for me still. Maybe about the guidance and the slight mismatch between the ARR growth and revenue targets. So ARR growth is higher. So should we interpret this as an end-of-the-year recovery, or is it more related to the headwinds from annual adjustment fees and etc.?
Yeah, so basically it's both. But as you mentioned, revenue is more time-dependent. So you need to be able to increase the revenue on a monthly basis to reach the same level as ARR growth. So that is one of the topics that was included in our own estimates. We expect the market recovery to be towards the end of the year.
Yes. And final one about the accelerated growth phase. You've previously said the 15% organic recurring revenue growth target.
So, how relevant is it for now and coming years, and how dependent maybe is it on overall market recovery?
I would say that now we have to focus on the actions, what we can do, and not to rely on the market giving us positive support. And reaching the 15% organic growth is absolutely doable, but we do need time for transitioning to that growth phase. And that will require that we are making it easier to upsell and cross-sell for our sales and for our clients. So, relying more on product-led growth rather than selling every individual component. And then also starting to get some more higher growth numbers from the new markets where we enter. So, of course, it's a factor of multiple things, but this year we need to focus on the things that are in our own control.
Like I said, the expectations towards the market for our clients to improve is very much still unclear, or the expectations are rather low. We are truly now focusing on what we need to do as a company, as a team, to enable the higher growth rates. The market boost will be then giving us further acceleration.
Thank you.
Hi, Atte Riikola from Inderes. One question about the ARR guidance still. Is it based on your organic growth expectation, or can it include some smaller acquisitions also?
We have not specifically excluded acquisitions, but we should be able to reach that guidance also organically.
All right. About the upsell and cross-sell opportunities, what do you see like the best short-term possibilities on that front? If you look at, for example, this year, what do you see on your product portfolio based on opportunities?
Yeah, so we are gradually starting to build more product bundles for our clients. So last year, we enabled the Ultima clients to have access to Trackinno and Vision, for example, as new capabilities. And now the question is more, how do we activate the clients to use that more broadly? So it's more like a question of helping our clients to change their ways of working, to start leveraging those technologies. And this is where our customer success teams need to really step up their game and focus on the clients and helping them to get onboarded. So we're going to do some changes in the product bundling, most likely to be more platform-based. And we are investigating now also our monetization pricing strategies during this year.
So it will be both sales activities and customer success, making sure that the clients are starting to use those capabilities, but it's also related to how we package, how we bundle, and how we price our technology. So it's both.
All right. Then about your accounting services, it's still like 18% of your sales, but you're not talking that much about it. So how do you see accounting services part of Admicom?
Yeah, I did mention that, and I was very specific that it was both in the ERPs, it's the products and the services. Based on the client feedback that we get, the customer feedback, there is a value, especially for the small and medium-sized companies, to get the support from us, also for the accounting services. The accounting services have been performing fairly good in these tough times as well.
And we are determined to build the accounting services of the future as well when it comes to looking at the balance of what the technology does in terms of the routines and what kinds of tasks and services we have within the team of ours. So it is part of the portfolio moving forward as well, and it's a very integral part of our ERP value promise to our clients. And if we look at the overall trends, what's happening in the market, the manual, let's say, constant routines are being automated. Do we believe that our accounting services teams will have less routines on their table moving forward? Definitely yes.
So we need to make sure that we are following that trend as well, and we're applying the data and AI into those routines and make the job roles more senior job roles and more demanding specialist roles in the future.
Okay. And then about you mentioned that Admicom has been over-investing in some areas, and now you're allocating the resources. So could you a little bit clarify on what areas the over-investment has been made?
So the R&D is the most obvious one. So based on the Bauhub acquisition and based on certain decisions of moving our software development people from external revenue to internal work, it is now temporarily, it's a little bit of an over-investment in terms of the percentage of the cost-to-revenue ratio. It is a slight over-investment, but it's a conscious one. It's a decision that we have made.
We want to make sure that now the ways of working and the synergies to leverage that R&D function across our portfolio is even better moving forward. So that's one obvious one. And of course, then the customer success teams are quite invested because we want to make sure that we're controlling the churn, we're making sure that we're keeping the clients during these tough times. So those two are the most obvious ones. And now, of course, moving forward, how do we want to make sure that our customer success is more spending time in upselling and cross-selling is one of those questions of reallocation of focus.
All right. Thank you very much also for the presentation.
Thank you.
Thanks. It's Daniel Lepistö from Danske Bank. Maybe starting up with the Ultima contract updates for the final quarter you discussed.
Maybe if you could clarify this a bit so we all get this right, so along with the terms of your contracts, more of your customers chose to pay the lower monthly fees for this year and opted for the higher tilt for the annual adjustment fees looking forward, or did I understand this correctly?
Yeah, so as said, our customers have the ability to change their revenue estimate basically at any point of time, and towards the end of the year, it's not a large number of customers, but there were more than before these customers who chose to update their revenue estimates, and for us, I think the timing is the most unfortunate thing because if they had done that in the beginning of the year, it would have meant that their negative adjustment fee in 2025 would be lower.
But now that they chose to do it at the end of the year, it had a decreasing effect on our ARR this year, but also it doesn't have that big of an impact on their adjustment fee next year because it's only a couple of months that they got the lower fee for.
So the customers opted to be a bit more cautious on the revenue estimates. And it's a possibility that if 2025 goes better than expected, then there is, they will shoot above their own projections.
Yeah, and I think that it's also in our playbook to make sure that if the market starts turning, that we also sort of contact the customers and encourage them to bring their monthly fees to the correct level before the annual adjustment fees are launched in 2026.
Yeah, because otherwise there would be a huge delta, positive delta on the adjustment fees.
Yes. And overall, we're targeting in moving towards more real-time adjustments in the pricing scenarios when it comes to the more revenue-based pricing components. So we don't have these lags in our adjustment fees. And the clients also from a client experience or customer experience perspective, they don't get these delayed, let's say, adjustment fee invoices as a lump sum. So we're aiming towards being more real-time with the market evolvement and the revenue trends of our clients.
Do you have any plans on maybe abolishing the annual adjustment fees?
We're investigating that.
Maybe second questions, what are your assumptions for the growth between different products? I guess now talking about ERP solutions and project management solutions when thinking about 2025, so are there any differences between the expected growth rates?
Yeah, so definitely there are. Ultima is based on revenue. The pricing is based on revenue. If the market challenges continue, then obviously Ultima will not grow as fast as the other products. So there is difference between project management suite and the ERP growth rates.
And can you remind us on the margin differences between these segments looking back maybe the previous acquisitions like Kotopro, now Bauhub? I think there are clearly lower margins in the PM solutions as of today compared to the ERP.
Yeah, so we are not disclosing the segment level profitability at this point, so maybe sometime in the future.
Okay, final question on the internationalization and the Swedish clients you referred briefly. So do you have any first impressions or how the situation has developed with these new Swedish clients?
Do you have any sort of more tangible plans for the Swedish market for this year?
Yeah, first of all, it's great news and a great achievement from the team that the products are now successful in production and the customer has accepted the solutions. And of course, we are now through that, we are helping to localize our products into the Swedish market in a broader sense as well. So through this, we're able to be more ready for the Swedish market penetration as we move forward. And when it comes to more detailed plans around Sweden or Estonia or any other markets, those are the things that we're now clarifying and solidifying during the beginning of the year. And most likely we will be speaking more about that in our coming earnings calls.
All right, thank you.
Thank you.
Hi, Satu and Simo. Emil Immonen from Carnegie.
Thanks for taking my questions. Just a couple more. First, could you maybe explain the external software development? Exactly what have they been doing for customers and what's the rationale in moving them to your own internal R&D?
Yeah, so they have been basically doing very traditional software development work for numerous clients. And if we look at the value capture that we can get from deploying their time into external software development versus deploying their time in enabling us to sell our products more effectively to the market, developing new product capabilities or integrating our portfolio, the value capture is much more higher when we deploy those people and their time and expertise into our product development. So over time, we're able to get a higher value capture from that time.
Continuing on that, what kind of KPIs do you look for in your R&D?
We're working on that.
We have started to look into our metrics of development efficiency. So we're improving that as we move along. And our CTO has been starting to look into having more visibility across our R&D function because, of course, now when we have more capacity, we want to make sure that we're delivering the results effectively as well. So we are applying some general metrics like DORA metrics already today, and we will try to figure out what's the best way of measuring our own efficiency based on those. So we're able to lead it also effectively moving forward.
Great, thank you. Then Satu, maybe on the guidance, how much do you feel in the ARR churn and downsell in 2024 is something you can impact actually going now into 2025?
Well, the insolvency-related or market-driven downsell and churn is difficult to impact.
But as Simo said, our customer success teams, after the investments that have been done in previous years, they are quite big at the moment. So we do expect the churn mitigation with the actions done in our customer success to impact the other type of churn outside of the market-driven.
Can you give an estimate how much of the churn was market-driven?
We are not disclosing that.
Okay, but I assume then that you expect that the ARR range is mostly dependent on the development of churn and downsell, not on how much new sales or upselling you can do.
Well, it's all of those elements.
Okay, that's all from me. Thank you.
Thank you. And we're slightly over our planned time, but let's take a few questions from online. There's a lot of questions about the EBITDA trend. So maybe Satu, you can comment a little bit.
How are we seeing that? Is this a continuous trend or is this just some kind of a conscious investment period for us moving forward?
Yeah, so this has been a conscious investment period. And as said in our guidance, we have the run rate cost base also increasing in 2024. We have still been in the investment phase. It's also visible from the guidance range that we do not expect the relative profitability to improve this year. But what's important to understand is the sort of the quarterly differences in our EBITDA. So basically Q1 and Q4 are most similar, and then Q2 and Q3 are higher in terms of profitability for us.
One thing that was mentioned when you talked about Admicom community is that our sales resourcing was a little bit on the low side towards the end of the year on the second half of 2024, which means that now that we have recruited those roles that were in our plans already before in January, that has an effect also on the sales personnel costs. I hope I answered the question.
Yes. Let's take one more question from online, and we will be also returning to the questions that we have not been, we haven't had time to answer later on to respond to those. But there's a question related to our level of product integration. So what is the current state and how are we planning to move it forward?
I would describe the current level of integration such that we have been focusing on integrating the user experience. We have unified the landing pages. We have been unifying certain design elements of our products. We have been developing the Admicom Design System to make sure that the user experience is more unified moving forward. And also in terms of the data integrations, we have been doing integrations in the product so that when you're moving from a stage to another, you can then also take the data with you so that it's more seamless and you're not always building things from scratch like you would have to do when you use point products and point solutions.
But in terms of moving forward, we want to make it even more seamless so that the readiness of taking the next step in the construction project is going to be even more seamless. And the previous stage builds on readiness to take the next stage so that the value for our clients comes from more unified platform user experience and use cases. And also when it comes to the data and AI capabilities, we want to make them seamless so that it's part of the product usage. I'll take an example from our existing products and the AI use cases. When you use our documentation solution and you bring in pictures, you get automatically populated the metadata and the description of the pictures so that you don't have to spend time in writing that manually. So it's more seamless and intuitive for the users.
All right, a little bit extended time this time, but I will take the blame being a new one and having a lot to say about the direction and then also to introduce myself. It's been a great privilege to have this earnings call with you, and we will be returning back to all of you in terms of our Q1 results and also online in terms of answering some of the questions that we didn't have time, so on behalf of myself and Satu, I thank you for the call. Thank you.
Thank you.