Good morning, everyone. Welcome to Tecnotree H1 results. It's been a record H1 2025 for Tecnotree, with pivotal financial performance driving our growth. I'm excited to share the results with you. As Tecnotree continues to expand its global footprint, today Tecnotree is no longer a niche player, but a global leader in digital transformation. We have been creating impact through scale, serving 1.3 billion subscribers in 75 different countries for more than 90 customers. Our AI investments that started out in 2022 are helping us monetize and multiply the effect of our scalability of delivery and acquisition of new markets. We are poised for disproportionate growth and market dominance in the digital transformation era.
What we have done operationally in terms of business transformation is brought efficiency by training our employees in telecom standards through TM Forum certification, ensuring our product stack is highly standardized with 4,500 product features serving 40 lines of businesses, and standardizing our interfaces to scale the delivery capability and expand our customers' digital footprint. What are the next steps? In terms of our strategy, the product portfolio evolution is a story to be told. We have had incredible execution of mark-to-market. In terms of our ability to embed AI since 2023 into our digital stack, it has brought a lot of intelligent automation, creating a five-year lead against our competitors in the telecom industry for AI.
In 2021, we launched our ecosystem play with fintech and other adjacent market capability in terms of partner onboarding on our stack, making our stack standardized, open, standards-based, reducing the TCO of the digital stack, and today creating native cloud enablement on the stack has driven the ability at low TCO, total cost of ownership, for our Tier-1 telcos to do incremental monetization, modernization, reducing their risk while they are digitalizing their operations, and also helping us to be way ahead in terms of differentiation from our competitors who are still retrofitting legacy applications. Our prudent investments on the stack and CapEx investments have helped us create the strategy and roll out the strategy, taking market share and growing our both cloud business as well as latest to add to our portfolio is the MVNO spread that we are getting regionally, especially in Europe.
In terms of H1 results by themselves, I think it validates our business, of course, our strategy for building a truly profitable business and transforming our business while doing so. The swing in free cash flow, five consecutive quarters of free cash flow, and the EURO 6 million swing is telling. Despite the dollar devaluation in constant currency, we grew ahead of the market, which was at 2.2%, and Tecnotree posted our H1 results of 2.7%. In terms of EBIT performance, we are ahead of the general competitors in the market, particularly in the product software product industry, with a 28% growth in EBIT, and year-on-year, I think it is a 32.5% growth of + 520 basis point growth year-on-year, which is quite significant. A lot of this growth has come from the operational efficiency that we have created within the business and transformed the business likewise.
It is really a very proud moment, a historic moment in our growth strategy to see the order backlog growing to above EURO 100 million. I think it's the first time in the history of the company, and it's a validation of our AI-embedded stack dominance, sweeping market share, and creating a very strong moat between ourselves and our competitors. The CapEx investments, while they were high in the beginning, have now been reduced by 7%. That marks the fact that we have productized and standardized our platform, and our customers are ready to take our platform out of the box and implement it very quickly, gaining scale and speed of execution. The ARR reduction is seasonal, and I'll talk more to it as we cover the revenue portfolio and backlog in detail, order backlog in detail. There is also seasonality in our collections.
While our collections have improved in terms of real quantum of collection, there is a seasonality in terms of cash collection as well. Next slide, please. In terms of actual performance in H1, I'm really proud to say that we took great market share. We got new Tier-1 telcos, but beyond that, we improved our cloud business and our MVNO ecosystem play to scale. We also strategized that with the SI partnerships that we have carefully selected over the years to partner with to grow our business into Europe and other regions. The recognitions that we have received from analysts and industry leaders are an external validation of our capability across multiple categories and also demonstrates our AI capability in some of the areas. This builds us strong customer references and customer confidence. It also accelerates our pipeline growth, these recognitions.
In addition, we are happy to announce that we had 10 go lives in the first half, which really talks a telling story about our delivery at scale, which has been enabled by our internal AI productivity measures that we have implemented in our delivery. That has also enabled us to deliver 600 plus features, way ahead of market standards in terms of number of features per quarter on the stack. The business resilience, of course, is expanding as customer confidence grows in our platform. We are able to increase the number of customers that use our ARR model to continue to evolve their capability on our digital stack as our ARR business is growing profitably. Moving to the next slide.
Based on the order intake that we have had in H1, we have definitely raised our guidance from low to mid-single digit to low to high single digit in order to remain cautious about the currency fluctuations and the dollar devaluations that we have been noticing in the market. However, we have captured market share ahead of many of our competitors and the industry norm of 2.2% by showing a growth of 2.7% for this first half. What is really interesting to note is the rebalancing that we have done between the regional growth. While our Middle East business continues to grow in terms of actual quantum of revenue, we show a good distinct growth in our European and American sales as well as revenue and order backlog.
When you look at the quality of the revenue, you see that this first half, the license growth has been significant, and naturally the delivery and ARR growth are slightly lower. Again, that is the nature of our business. They will pick up in the upcoming quarters, and the shift from license to ARR will create a higher profitable ARR growth in the future quarters. In terms of EBIT, I would say we are best among the product technology product companies in the world. A 28% EBIT return is best in class in the industry. Plus 520 basis points increase definitely shows you that we have brought efficiency through AI and built scale through introducing AI productivity into our engineering processes.
That is also further demonstrated by the fact that we were able to lower our CapEx-to-sales from 18% to 14% in the first half, and we are well on mark to deliver the 12% CapEx-to-sales this year that we had promised in our guidance. Next slide. On free cash flow, I think the story that has to be told is the internal business transformation that we embarked on in Q2 of 2024. When we recognized the headwinds that were approaching us, we deliberately announced an operational reduction of EURO 7 million. We have achieved those reductions already in the first half of 2025 in complete, and therefore the financial and business operational discipline has helped us for the last five quarters to deliver positive free cash flow in a market that is fairly volatile in terms of dollar fluctuations and other currency fluctuations that we have faced.
It also demonstrates the agility and the resiliency in the business that we have achieved. Despite the dollar headwinds, we were able to achieve the free cash flow and stay EBIT positive, a strong EBIT growth as well. We have been self-funding this growth while staying profitable. Finally, I just want to show how the strategy is evolving. All the CapEx investments that we have done mark-to-market that I talked about earlier are bearing fruit, and here are the real defining results that show that we have taken greater market share from our competitors in terms of growth in revenue on the digital platform, 2.7% compared to 2.2%, which is the industry growth indicator from the analysts. Our cloud business has grown 44% this first half.
This is a very telling story of all the investments that we made on the digital stack to be cloud native, open standards-based stack, which is showing definite returns on investment in terms of the growth in the cloud business. The cloud market today is growing disproportionately. The expected growth is about 12% to 14% per year, year-on-year, up to 2030, and we are growing way ahead of the market trend. In terms of the MVNOs business growth, we achieved 29% growth in this business in the first half. This is a growing reflection of digital transformation where connectivity is the foundational capability, especially after the 5G explosion, to create sub-brands and to have ecosystem play in adjacent markets. Through connectivity, we capture enterprise market share to provide digital transformation capabilities to other types of brands in the areas of sports, health, e-commerce, fintech, etc.
Tecnotree has achieved a good footprint in this area, and this market is exploding and having a growth of about 8% to 10%, and we are capturing good market share. We are also scaling our regional growth and balancing our regional growth while maintaining the core capabilities and the core customers that we already have in our portfolio by partnering with system integrators, who are very strategic in nature for our business expansion into these newer markets and newer customers. The system integrator and other partnerships that we have with infrastructure and hyperscalers are strategic in nature, and they are not for margin growth at all. They are meant to help our business bundle offerings and reduce TCOs for our customers. Therefore, we have a very winning strategy with these partnerships to scale our operations.
Finally, in terms of our guidance, as I stated earlier, if you can move to the next slide, we are maintaining mostly all of our guidance. We have only changed the revenue guidance from low to high single digit growth. That is in line with the EURO 100 million order backlog that we have that we will start retiring in the upcoming quarters, several quarters, not just H2 of 2025. Our margin growth of 200 basis points, we are well on road to achieve that despite the dollar devaluation because the profitability in the business, as I've said, the underlying business is fairly stable and sustainable for profitable growth, especially because of the AI and native capabilities and the use of AI to multiply the productivity and efficiency gains in our engineering capability.
Finally, I think we will deliver, not in constant currency, but in real currency terms, greater than EURO 4 million in free cash flow. The rest of the guidances remain the same, and I really believe that Tecnotree is well poised to deliver exceptional results to our investors, and we look forward to a very healthy H2. Thank you. On to Indiresh, who will give us more details on the financial results. Thank you.
Thank you, Padma. Yeah, can we move into the summary of what we have? What I have presented here is not just the last year's or the last half year's, but comparatively from 2022, which will give us a broader view of our financial numbers and also tell us where we are heading and what we have done in the current year. As you can see, the revenue numbers are at about EURO 34 million right for the last three years, and this year in constant currency, we were able to achieve a higher growth, even though in real currency we were down by 2%. We already spoke about the headwind, what we had from the dollars. We are also impacted by that.
The earnings before interest and taxes, which is one of the major measurements of our performance, has been at a very high level at EURO 9.6 million compared to EURO 8 million what we achieved in last year H1, and almost in line with what we did in 2023 and substantially higher than what we did in 2021. Financial items where I want to draw the attention of the audience here, it is at EURO 5.2 million is the cost I need to take in this first half of the year. As you can see, the financial items mainly comprised of the loss, what we have to take about EURO 4 million compared to EURO 2.5 million in this first half of the year, which is basically the dollar weakening against euro, what we discussed earlier by about 13% that has hit when I report the numbers in the euro numbers.
The income taxes based on what the collections we make was slightly higher. The net income, because I had to take a very high cost of the foreign exchange losses, it is lower at EURO 2.6 million compared to EURO 3.7 million in the last year. The cash collection, which is one of the high parameters what we have internally for our performance, we are able to collect about EURO 30.8 million. Again, I want to draw the attention, this is not in a constant currency, but this is in the real currency. After we took the hit on the conversion, is at EURO 30.8 million compared to EURO 26.1 million what we did last year.
As Padma already spoke, the highlight of this half year or this quarter has been the orders what we got, which is phenomenally high, probably the highest in any quarter at EURO 74 million in this half year what we got, and compared to about EURO 23 million what we had in the previous year half year. The order backlog, which is a result of the orders what we got and what we consumed for our revenue, is at an all-time high of EURO 105 million compared to EURO 72 million what we had. The earnings per share was, because my net income was lower, at EURO 1.15 compared to EURO 0.22. Just for us to remember, for 2023 and 2022, it is not strictly comparable because they were before the split of the shares we did in 2024.
One other positive thing I wanted to highlight here is the free cash flow we had at EURO 2.1 million compared to a negative EURO 3.9 million the previous year H1. I just want to call out, in the last four quarters, since the second quarter of 2024, we have got more than EURO 4.2 million in positive free cash flow in the last four quarters. As Padma mentioned earlier, for the last five quarters, we have been consistently achieving a positive free cash flow. Can we move to the next slide, please? I'm coming now mainly to the quarterly numbers. As you can see, the quarterly revenue was at EURO 7.3 million, slightly lower than last year. In constant currency, we were at EURO 18.8 million for this quarter compared to EURO 18.7 million, almost comparable to last year's Q2.
The EBIT, again, as we saw for the H1, for the Q2 was also at a reasonably high level at EURO 5.1 million compared to EURO 3.5 million in the previous year. Rate rating, again, the huge loss we had to undertake because of the weakening of certain currencies, mainly the USD, at EURO 3 million is the exchange loss I had to take in this quarter. Taxes were at EURO 1 million. The collection was reasonably at the same level as last year at EURO 16.4 million. The order backlog, as we said, is at a very high level of EURO 105 million. The earnings per share is, because we had higher financial items, at EURO 0.06. Some of the highlights in this quarter have been the operating margin at 29.2% compared to 18.8% in the previous year. The net sales in constant currency increased slightly to 18.8%.
Exchange losses were very high at 2.7% and free cash flow again at 1.1%, whereas in last year Q2 we had EURO 800,000 as a positive cash flow. Can we move into the next slide? I think one of the other parameters we discussed is on the day-to-days. The collections continue to be challenging. While overall the receivables have come down, we still have a substantial amount to be collected, which are above one year at 22%. All of us know that the customers we cater to are very large telecom operators. In certain countries, we still have the challenges in collection at 22%. Day-to-days, if you look at as a parameter, there's a lot of seasonality in this. Also, you see from 225 days, it comes down to about 144 days, and again it goes up, comes down.
By the end of the day, I hope or we expect our day-to-days will be between 100 to 140. That is a guidance we are given. Can we move to the next slide? Yeah, we spoke about the currency risks we have. 2025, EURO 4 million forex loss in H1 due to the headwind with 13% weakening of USD against euro. Exposure to frontier, how are we trying to mitigate it? We know that dollar devaluation is something unexpected or nobody had thought. Last year, probably at the same time we were thinking we had a huge risk in the Naira. Nobody had thought that dollar would be behaving the way it did in the first half of the current year.
We were always targeting to reduce our exposure to the frontier currencies, which we did in the first half of the year, and now it stands at about 10% of our total revenue. Growth in mature markets is expected to reduce the impact of currency risks over time. As we know, any weakening of any currency is normally spread over four quarters, it takes four quarters to rebound. As you can see in the next slide, what we have put, or rather in this slide, what I have put as a diagram, the weakening of the dollar right from 2008. You can see that between the dollar and euro in 2020 and 2021, the dollar was highly strong against euro, but that trend is weakening. We never saw such a drastic weakening of about 13% in a few months' time.
One thing, if you look at that, we didn't change the guidance for the free cash flow. We're still keeping at the real currency above EURO 4 million. One of the reasons for that is we expect the dollar to be slightly stabilized versus euro, which we have been seeing in the last one month. With that, our guidance on the free cash flow remains the same. We have explained last year in the volatile currency or the frontier market, what we call our revenue used to be at 27%, and that has come down drastically to 10%. We were able to manage the other volatile currencies, but dollar headwind really hit us. Can we move to the next slide? This on the balance sheet, I want to call out certain numbers for the audience here.
I wish to compare most of the numbers in the last six months, how it has moved. The trade receivables have come down from EURO 34.5 million- EURO 32.8 million. The other receivables, which mainly comprise largely of the unbilled and other long-term receivables, have come down from EURO 42 million- EURO 37 million. The cash balances have gone up from EURO 16.8 million- EURO 19.1 million at the end of the current half year. The shareholders' equity, as a combination of the increase in the profitability, has gone up to EURO 93.1 million at the end of June 2025. Convertible debentures, there are no changes. We still remain at EURO 23.1 million. The other significant is the short-term trade payables, which was at EURO 15 million. We brought it down to about EURO 10.4 million. Minor growth in the intangible compared to last year at 2024. Trade and other receivable reduced by 9%.
Growth in cash and cash equivalents driven by free cash flow generated from operations and significant reduction in the current liabilities. This is how I want to present the balance sheet to the audience here. Can we move to the next slide? What are the takeaways from the finance perspective in this half year? Order book at a record high. Five quarters of continuous free cash flow. We are on track to meet the guidance of greater than EURO 4 million in the whole year. Cost-cutting measures, which we initiated last year, have been paying off reasonably with substantial margin improvement in H1. Dollar-based contracts hurt by dollar weakness in H1. Healthy underlying performance and all the guidances is on target, and we have increased the guidance on the revenue. We expanded up to the high end of the single digit growth. Can we move into the next slide?
This is what I had to the audience. Thomas, back to you. If there are any questions, we are happy to answer them.
Thank you for the presentation, Indiresh and Padma. Yes, we had three pre-sent questions this morning from some users, and there are some questions in the chat. If you guys are ready, let's start with the first question. The recent contract wins you announced, how quickly will they translate into profits?
Okay. Padma, do you want to take it or do you want me?
Why don't you answer the question?
Yeah, I can take. As you are aware that we had certain large orders we did announce in the last quarter, three of them, in fact, one in South Africa, one in Netherlands, and one in the UK. The large orders, as you know, that we had announced that it will take the delivery of them will start in Q3 and Q4 of this year, and it's a multi-year contract. We expect the revenue to flow in over the period of time. That is one of the reasons why we expanded our revenue guidance from low to mid to low to high. While I cannot be specifically saying how much revenue you are going to get in each quarter, expansion of our guidance should indicate our confidence in getting the revenues from these large orders.
Thank you. Given the current dollar-to-euro exchange rate, can you please quantify the FX headwind for the rest of the year?
May I take that?
Yeah
Thank you. Thanks for the question. Yes, I don't think anybody had really anticipated that we are going to have such a headfall on the dollar devaluation. Just to recollect, probably in the last couple of years, everybody was saying that Tecnotree has a problem because most of the currencies we deal with are the frontier currencies, are subject to huge devaluation. Strategically, we thought that we should move away from the frontier currencies, which we did. We gave a guidance and we started moving into that. As you can see, from 24% last year, we came down to 10% in the current year. I don't think anybody had anticipated that the dollar will get devalued in six months by 13%, which is phenomenally very high. We have taken that into account when we have given our guidance.
As you can see, in spite of that, we had a positive free cash flow of about EURO 2 million in the first half of the year. We hope, we expect, we anticipate the dollar may not have a similar steep fall in the second half of the year. My currency guidance, we are able to expand because we give it on the constant currency, but our free cash flow is on the real currency. I hope at this point of time, we still hold on to our guidance. If there are any drastic things happen, and if there are any things to be reestimated, we'll always come back to the guidance. As of now, our guidance stands that we are going to achieve free cash flow of more than EURO 4 million in the real currency in the whole year.
Yeah, I'd just like to add one point, if I may, to this. Despite the fact that we deliberately rebalanced our regional portfolio to ensure that we enter mature markets and move away from frontier markets because of the currency fluctuation and the cash collection issues that we faced also. Nobody could have predicted the headwinds that we met with the dollar devaluation this first half. Despite that, the operational excellence and the resiliency that we had already done transformationally in our business poised Tecnotree to weather that storm and still post a very profitable EBIT and maintain a positive free cash flow as a positive balance this quarter, well in line with the guidances that we have given the market.
I believe that is the core capability, the core agility, and the core operational excellence that we have built in, indexed and protected the business to weather these surprises that we were hit with.
Very true.
Thank you for that. Next question was, cash on balance sheet was EURO 19 million. Is it right to assume the balance of the convertible debentures won't be needed?
I can take a little bit and probably want to add, you can add. Yes, we have a healthy money in our bank account, which is sufficient as of now to meet our day-to-day operations. If you really look at it, the purpose of CCDs when we raised was not for using it for the regular operations of the company. There is an ROI which we need to look into between getting the additional money and the dilution it can cause to the shareholders. That is a continuous evolvement we do. As of now, there is no change in the information we have that the subscriber has time till December to pay for this subscription.
You want to add anything, Padma?
No, I think that's well said. Thank you.
All right. Next question. What margin do you earn on deals through system integrator partners like Tata?
Actually, our relationship with partners, whether it's a Tata Communications Limited to expand our footprint or HCLTech or Accenture or Microsoft Azure for infrastructure, cloud infrastructure, etc., are always strategic. It's never for margin performance of our business. It's to gain market share, to bundle capabilities that are very, very geographically important for our customers and bring scale to their operations and their ability to monetize revenue. All the partnerships we've had so far are extremely strategic in nature. If you take Tata Communications Limited, we entered the ecosystem play with partner onboarding on our platform in 2021, where we have a fintech portfolio to bring financial equity in emerging markets. We also introduced healthcare with e-health capability on our platform.
We have introduced sports and gaming capability, multimedia capability on the platform. The Tata Communications Limited relationship is to expand that ecosystem play into multiple brands across, you know, market segments which are adjacent to the telecom business. The telecom business and the stack, the digital stack that we have is the underlying capability upon which businesses can transform themselves to become more digital. That's the strategic intent and go-to-market strategy with Tata Communications Limited.
Thank you, Padma. Given the recent steps towards better corporate governance, improving cash flows, new added logos, what kind of steps management sees to attract more institutional owners? Is an international capital market day in the near future an option that you have discussed? If yes, how soon could this materialize?
Thank you, Gomez. Thank you for recognizing that good corporate governance has come by. We definitely work very hard to build more transparency, gain more trust of our investors, and continue to create a very stable platform for profitable business and investor confidence. Yes, we will continue to meet investors. Last year, we participated in a European investment forum in France. This year, we have plans both in H1 of this year and H1 of 2026 to have 10 more investor forums where we demonstrate our capability and the true value that we bring to investors who are interested in technology. We will continue to do that for sure.
You mentioned AI a lot in your product. What exactly does this do? What are your plans?
Our plans for AI are to strengthen. First of all, we were one of the very early adopters. We acquired a company which was top 10 in the world for AI, along with Microsoft, Google, and other industry leaders who were investing very early at very early stages in AI in 2022. We acquired Cognitive Scale. We integrated the Cognitive Scale AI engine into our digital platform. It came with 137 patents. By integrating and embedding the AI capability into our platform, we were able to help get AI capability to our customers so that they can improve their customer intimacy, their customer insights, and governance, as well as monetization capabilities on our platform. Internally, we adopted AI in our engineering processes through which we enhanced our scale and productivity and ability to deliver, and we reduced our costs significantly over the last few quarters, which brought in operational excellence.
We continue to use AI, the more agentic AI, to help customers increase their capability to engage with their customers. We will expand our AI footprint. As cloud technology grows, AI becomes a necessity for many of our customers to expand their footprint and adopt hybrid cloud capabilities. Having an AI-native stack definitely helps us in that area. I believe we are ahead of the game in terms of telecom operators being ready for intelligent automation. We are ready to serve them today because of that early investment and early adoption.
Thank you. In the live chat, there is a question on, I think we have already answered this question. Do you expect Fitzroy to pay the unpaid subscription price of the convertible debentures in the total amount of €20 million to the company by Q4 2025? Do you have plans for acquisitions or why is this €20 million needed? I think Indiresh, you covered this earlier, but I wanted to read it out.
Yes. As of now, we have no change in the information that Fitzroy has time to make the payment till December, and they are going to make the payment. This is what currently we understand, or this is the information we have. What do we do with the money we get? As you know, the money that we raised for CCDs was mainly for three purposes. One was the repayment of the loans which we had taken at that point of time to acquire the company in the U.S. The second one was to invest in our R&D, and the third one was to do any inorganic growth. We always look for those opportunities, and if that is needed, we will do it. As I said, it's an ROI trade-off between getting the additional money and the reduction for the shareholders' value.
We will look into that, and we'll constantly be updating the shareholders as and when we have something to share.
Thank you. There is a question that came out. Tecnotree has EURO 5.3 million interest-bearing liabilities, and that has been going up during the year. Do you plan to pay out those loans if Fitzroy pays convertible debentures?
As I said, one of the purposes of the convertible debentures is to repay. We take an ROI on whether it's easier to pay off the debts or invest in our products or do an inorganic M&A. We take a call as the time comes for that, and we'll keep everybody informed about that. As of today, I don't have any specific plans for that money, saying that this is what we are going to do. We do it when we get the money.
Thank you. Also, a question comment on, please give an update status of receivables from liquidation of Tecnotree Convergence Middle East FC LLC during the financial year of 2023. How much of the purchase amount has been paid, and how much do you expect to receive? I believe this was answered also in the Q4 or Q1, but let's.
I can only say that we are on track to recover whatever is the money that was owed to us when we hived off that business. As of today, I do not see any risk in the non-collection of that money.
Okay, and final question in the comments is, Thomas Koponen, do you plan to attend investor discussion at Indiresh Forum? I will just reiterate that I have been given a profile by Indiresh to receive the reports, but I am not actively participating in the forum. We try to treat all the investors and access equally to everybody, but you guys are always free to send an email to investorrelations@tecnotree.com for comments. Let's see if there's any other new questions coming in the chat, or have we covered them all? Yeah. We have no new questions coming in to the Q&A. Before I end the call, is there any final remarks based on the H1 2025 report?
As I already said, we are extremely happy with the company performance and the underlying foundational transformation we have done both in terms of financial performance and operational excellence. I think we are poised for growth. We have taken good market share. We have got a good, healthy order book. We are returning positive free cash flow on a continuous basis, and our profitability is strong. I am looking forward to a healthy H2 and returning good value back to investors. Thank you.
All right, thank you for your time, Padma and Indiresh, and thank you to everyone who was online for the call. I'll be ending the call here today, and thank you for your attendance and your questions.
Thank you.
Thank you.
Bye-bye.