Ladies and gentlemen, I welcome you to the 2024 Financial Results Media and Analysts Conference of the Ascom Group. I also welcome very warmly the participants on the Swisscom webcast. If you'd like to answer some questions there, just use the question button on the chat level there in the webcast, and we will then answer all these questions in the Q&A session. With this, I will hand over to our CEO, Nicolas Van den Abeele. In addition, we also have here our CFO, Kalina Scott.
Thank you very much, Daniel. Good morning to everyone present here. Good morning to all the people joining us via the webcast. I would like to start the 2024 Results Media Conference. I'll start with a first overview with the key highlights on 2024. I'll pass the floor to Kalina Scott, our CFO, for an update on our financials. I'll come back to the strategy and the business update in the last section before then moving to the guidance and the Q&A. Let me start first with the key highlights for 2024. I would like to start by saying that obviously 2024 was a difficult year, was not a good year for Ascom, as we actually delivered results which were below our ambitions in terms of growth, in terms of financial performance. 2024 was a rather difficult year.
We had, in terms of revenue, a revenue decline of around 1.6% at constant currencies, around 3%-3.5% at actual currencies, and a similar profile in terms of orders. I would like to say we're really a mixed performance picture depending on the regions and the businesses in which we're active, with some regions like the Nordics actually performing quite well, DACH international markets as well, with good positive growth. The Nordics was actually more than 10%. Some other countries like France and the U.K. underperformed, and I'll come back to that also later in the presentation. This resulted in a lower than expected financial performance with an EBITDA at 7.4%, a net profit at CHF 3.7 million, substantially lower than our initial expectations for the year.
Kalina will also give much more details there on some of the effects that we had, actually some of the headwinds, some of the exceptional effects that we had also in 2024. Last but not least, despite, I would say, this financial performance, we have a solid balance sheet with a positive cash position of around CHF 18 million and also a solid equity ratio. We will come back to that in a minute. Now, I was referring to the headwinds of 2024, and we've seen actually that while the revenue development was close to prior year, profitability decreased substantially. Substantially due to the revenue growth, which was lower than expectations, and we've seen in the whole macro environment that, I mean, we are today in a much more volatile environment than we used to be a couple of years back.
It's probably not going to change that much in 2025, but also that resulted in a lower than expected investment in hospitals due to their profitability levels, basically likewise in enterprise. Now, lower top line resulted also in a lower profitability, which was impacted by some non-recurring items, I would say, in terms of a higher severance cost that we had in 2024 due to the restructuring plan that we implemented, but also higher depreciation amortization in R&D and some one-off items which Kalina will highlight. Now, what does that actually mean? What does it mean for the underlying market dynamics, and what are we as Ascom doing to counter that or to try to capitalize on that?
First of all, I mean, we speak a lot about the market volatility and the macro volatility, which is affected in 2024, which also at the beginning of 2025 continues to be affected. We are in a different world today, and we have to face it. Nevertheless, the message I want to bring here is that the underlying trends in the markets in which we are, which is the healthcare market at large, which is also the enterprise market, continues to be solid in the sense that critical communication collaboration is key, both in healthcare as well as in enterprise. The underlying trends in terms of aging of population for healthcare, in terms of shortage of staff, clinical staff, remains and will remain also for the continuing years.
Let's say on the back of a more muted 2024 results, I would say the underlying industry trends remain solid. Also for hospitals, right? Despite the shorter-term issues, I would say, given their level of profitability, it is also an enabler to invest in the solutions that we bring in terms of alarm orchestration, in terms of automating workflows, in terms of making care delivery easier and also more efficient. Now, Ascom has developed and has continued to develop a leading position in each of these markets in which we are present. I just put a few points there. I mean, we have a strong position in Ascom. That's what we continue to leverage. We're number one, number two, depending on the regions in which we're active. Also we have a very strong position in mobility, especially with DECT and.
I must say that it is a very robust technology. It's a very proven, cost-effective technology. We use it in many of our hospital customers, but also a lot with enterprise. We won recently, last year, a very major project here in Zurich, where we actually installed our DECT solution combined with also some personal safety solutions for the whole prison environment, the security environment actually in Zurich. Healthcare software, which is a very important part of our business as well, and where we have a leading position in the different segments in which we are active there, but it's a much more vast market, much bigger market with also a much more fragmented position.
Now, we have been working over the past one and a half to two years on also making our solutions better, integrating our platforms, simplifying our solutions in order to have better and more scalable solutions, have also a better cost of ownership of our solutions, make it less costly, and also work on more recurring revenues, which has increased over the past couple of years. On the back of this macro environment, we are also taking the right actions to position the company better for growth in the future with much more scalable solutions, less costly solutions as well. In 2025, we definitely plan to bounce back and to work on returning again to positive growth.
Positive growth will come to the guidance a bit later this morning, but also much stronger operating cash flow generation with a leaner and less, let's say, costly delivery organization or organization at large working on our cost base as we speak. The key drivers for that is, I mean, for the stronger performance in 2025, for the better operating cash flow is a strong position at the beginning of the year with a solid backlog. Over 50% of that will be turning into revenues this year. We also expect in some of the countries a gradual pickup again of investments into the healthcare space. We'll come back to that in a minute. Also the cost actions that we've taken in the second half of 2024, which caused a negative effect in terms of severance cost last year, will have a material run rate effect in 2025.
This will also remain a key focus this year to continue to work on that. With this, I would like to give the floor first now to Kalina, who will give us an update on the financials, and then we'll come back with a strategy and business update.
Absolutely. Good morning, ladies and gentlemen, also from my side. The next few minutes we will spend with the financials. In particular, on the top line, we do not need to spend too much time because these are numbers that you have already seen from the press release, and we have also announced them in January. As you know, we had 3.5% lower incoming orders and also lower revenue, but nevertheless, we had a higher backlog. We are starting the year 2025 in a solid position. Our EBITDA declined substantially compared to 2023, and there are quite some special effects in there. I will go into more detail through the P&L in order to show you where these effects come from. Our networking capital increased slightly December to December. This is a snapshot, really, December to December. I would say overall we have a solid working capital management.
The reason for this particular decrease is that we did quite some shipments in December of 2024, and therefore we have somewhat higher accounts receivable. Working capital is something that we have a lot of focus on and will continue to manage very carefully. Capital expenditure remained at a relatively high level. It declined a bit compared to 2023, but this level of CapEx is quite high. Also here, I will have a separate slide to explain to you where we have invested in 2024. What we see here is a split of the order intake. Basically, in maintenance and support, we had lower order intake than in the previous year and then projects and products as well. However, for maintenance and support, I would like to make a comment that we had a one-off effect in 2023. It is in fact a solid business.
We do not expect any decline in our revenues from maintenance and support, and it is also a recurring and a profitable business for Ascom. This is a development that I'm very comfortable with. What you see on the other graph, however, is the development within the regions. Here you can see quite clearly that in the major European markets, we generated less order intake. This was a mixed picture. Some countries were relatively flat, and some countries had lower performance than in the prior year. In particular, it is worth mentioning France, where it was difficult to compete in a very strained market, especially in long-term care, and also in the U.K., where we were affected by the elections and the temporary situation where orders were low. In the U.S. and Canada, we had a slightly higher or in fact reasonably good order backlog.
Nevertheless, this remains a market where we expect that we should be able to grow even stronger. In the rest of the world, we had double-digit growth, and also in OEM, we had a reasonably good development, even though this is a market segment which is in the meantime not so substantial for Ascom. Nevertheless, it is something that we continue to keep and to benefit from. Here you can see the order backlog development over four years. It is a positive picture. We continue to increase our order backlog, and this is in the end what gives us confidence that Ascom will continue to perform or will perform in particular in 2025 quite well. About 50% of the order backlog from 2024 is expected to convert into revenue in 2025, and this is again something that helps us as a good starting point into the year.
Here we split the revenue development into two components. One is the organic development, which is a decline of 1.6%, and the other one is the currency headwind, which comes from the translation of the currencies in which we have our revenue toward Swiss franc, which is an additional 2% negative impact. Maybe to mention here, the currencies that are most relevant for us in terms of revenue are euro and U.S. dollar, and both of these currencies have been declining now over quite some years against the Swiss franc. We have actually had this negative currency effect over quite a number of years. Revenue development. Here we want to show you two aspects. On the one hand, the development of maintenance and support net revenue here, coming back to what I mentioned before, it is a stable pillar of Ascom's revenue.
It grows continuously and in fact demonstrates the health of Ascom's business. Here we had a decline in the products, projects, and services, which is something where we expect to see now in 2025 again a pickup. In the next four columns, you see the development of half year over half year, and there is an interesting effect to be seen here. Normally at Ascom, the second half year is a bit stronger than the first half year, as many hospitals and other institutions want to finish their projects by December. Usually we see quite strong revenue in the months November, December. This is the effect that you also see in 2024 in terms of total revenue. In 2023, it was the reverse where you see that we had stronger revenue in the first half than in the second half.
This goes in the direction of explaining or partially at least explaining what has happened with the revenue development of Ascom in 2023 compared to 2024 or in 2024 compared to 2023. What you see here is a delay effect of late shipments of material that has been ordered and was supposed to be shipped in 2022. However, in 2022, we were still affected by the component shortage. We were able to ship this material in the beginning of 2023, and therefore we have actually a positive one-off effect here. I think this is a very important slide in order to understand what has happened or what are the financial impacts of the events that have happened at Ascom in 2024.
I will go through these seven points in some detail, and I think they will then allow you to make your judgment about the financial health and the operational health of Ascom after having the understanding of where the impacts actually come from. The net revenue we have discussed, but the next item that you see here, gross profit, you see actually a decline in the gross profit as % of net revenue. This does not have actually to do with increasing material prices or with anything like this. This has to do with two special effects which we had in 2024. This was basically an obsolescence write-off which we had to do of CHF 1.7 million. In addition, we made an allowance for a project which was booked as work in progress, and it was on hold.
In order to be prudent, we have made an allowance for this project. You can see that these two effects together would already lead to the effect that we would not have a decline in the gross profit. Yes, these are quite unusual effects. They are quite substantial, but it is something that was necessary to do in 2024. With this, I can say that we do not expect certainly the obsolescence to recur because we have now looked through our materials and whatever we deem to be old or obsolete has been written off here, and we are starting with a clean sheet in 2025. The next topic, marketing and sales cost. Also here, what you see is an increase of CHF 900,000. However, this does not have to do with increased marketing and sales cost. It has to do with two effects.
One was a higher severance cost in 2024 than what we had in 2023, mostly from one individual. It is quite unusual to have so high severance cost. The other one was a provision for bad debt, which in fact we were able to recover in 2025. However, by the end of 2024, this was quite a long time overdue, so we had to make an allowance for it. It was quite a substantial number, and in the end, it turned out to be fine. Research and development cost. Here you also see an increase of CHF 2 million, but this does not have to do with an increase in the effective cost in 2024 versus 2023. This is in fact entirely due to higher amortization of intangible assets, which is part of this cost.
This amortization of intangible assets has been the result of increased capitalization of projects that has been done in the years 2023 and 2024 and also sometime in the past, but especially in 2023. You are going to see the same effect when I go through the capital expenditure. Basically, we have had important projects which were capitalized. One of them was Myco 4. The other one was the Ascom Unite Platform, and there were other software developments that were very important. They were capitalized in 2023 and also in 2024. Here we see the effect in the amortization. Administrative cost also is a CHF 1 million increase, but also here we actually have an effect of higher cost for long-term incentive plan. This is also something that we are required to book.
In fact, whether this long-term incentive plan is going to have that value or a lower value remains to be seen. We will know that by year end. I would say that it's a book effect, certainly not a cash effect. Also here, we've had substantial severance cost, much higher than in 2023. Depreciation and amortization is what explains the big difference that we have between the EBITDA and EBIT. This is again the increase due to the investments in R&D, but also in our ERP system. You can see that depreciation and amortization, which predominantly consists of amortization of intangible assets, have increased from CHF 9.9 million to CHF 13.7 million. This unfortunately affects the net profit, even though, as you know, it is not a cash impact in this year. Net profit was additionally impacted by an accounting topic, which is in fact somewhat unusual.
Let's call it like this. It relates to recycling of cumulative currency translation differences. It is a rather technical exercise, but effectively what it means is that when you have a dormant entity and you deconsolidate it, when you have currency effects, you need to show them in the P&L and really in the financial loss as financial loss. This does not represent anything operational. It does not have any cash effect, and it does not have any effect on equity either because these currency effects had already been recorded in the equity. Rather than moving them from one position in the equity to another, Swiss GAAP FER 30 tells us that now they need to be recycled through the P&L and therefore actually reduce the net profit. Also, indeed, a very special effect that we've had here. Finally, tax expense looks like it has increased a lot.
What you see is an effective tax rate of 42%. Also, this looks very unusual, and you can say, okay, there is no single country that has such a high tax rate, which is of course true. Also, this does not have to do with any effective negative tax development in Ascom, but it has to do with the release of a deferred tax asset in one country, which is again an accounting effect which has a strong impact on the tax rate. Later on, I can show you some more details if you're interested to see on these last two effects so that you can see better what is the implication. All in all, you can see that there were quite a lot of effects here that we had in 2024, and they all impact the P&L in a negative manner.
Certainly, I don't expect to have such an accumulation in 2025. Of course, you never know what impact can still happen from somewhere, but let's say that from what we see today, we do not see any such substantial effects from today. Therefore, I would say that we have started 2025 with a clean sheet of paper. Here's some more detail to CapEx. As I mentioned before, you see that the historic CapEx was somewhere at around CHF 12 million-CHF 13 million. With increased investments in our unified platform and also in the Myco 4, you see that they increased to above CHF 16 million in 2023. In 2024, they went slightly down. For 2025, we expect that we will be also a little bit lower and that we should be tending towards the more historic level of 2021 and 2022. What specifically did we invest in?
Mostly it's our platform solutions, as I mentioned. It's mobility solutions, but also we have investments in tangible assets here, the dark green. In the last two years, this had to do with the refurbishment of our Swedish office. Our Swedish office is the only real estate that Ascom owns, and it was due for refurbishment. This project has now been concluded in 2024. Therefore, the investment in tangible assets will reduce substantially in 2025. Cash development, you see quite a clear picture. Our operating cash flow was CHF 20 million, CapEx CHF 15.5 million, and we also paid a dividend of CHF 10.8 million. In the end, we ended up with a cash position of CHF 18.6 million at the end of 2024. I would say we continue to have a very solid financial position. You can see this here.
Also, when we look at the balance sheet, we have a strong equity ratio of nearly 40% as per end of year. We had no borrowings at the end of the year. As I mentioned before, we continue to manage very tightly our working capital. I hand back to Nicolas, and I look forward to your questions at the end of the session.
Thank you, Kalina. I would like to give you a business update and also a strategy update for Ascom, what we're doing, what is also planned in 2025 and beyond to restore our financial position, but also work further on our equity story. First of all, how is the market evolving?
I was referring in the introduction of my presentation that despite the volatility that we see in the market in 2024 and also this year, the underlying trends remain actually positive, specifically for the healthcare market, but also for the enterprise market. Demographic change with aging population, shortage of qualified medical staff, the need for digitalization, the need for integration of the different solutions really are underlying trends that remain positive. I mean, I was in the Netherlands a few days back. Basically, if you look at the aging population, it would mean that over the next 10 to 20 years, almost one out of four, one out of five persons' active workforce would have to work into the healthcare sector, which is impossible.
This is what is really coming at us in the Western world and developed markets, and this is where also we see a future demand for the solution that we offer to our different customers. Now, looking at the business profile, and I mean, we have a strong pillar in healthcare, and that's what we are developing strongly, what we have developed over the past number of years. We have an equally strong pillar in enterprise, which we're also developing. There's almost a 70-30 split between the two, a little bit less than 70 on the healthcare side, a bit more on enterprise, plus OEM around 33%. We really have a number of key solutions that reply or that answer to key customer needs.
To give a little bit more detail there, in healthcare, we are really viewed as a very strong leader in the market in alarm management, alarm orchestration in hospitals, and also in long-term care homes. The whole orchestration of alarms is key. It is something that has to be present that is regulated by law, and you have to have systems really that support that effectively with escalation procedures, etc. Alarm management is key for us. It is a big part of our business. So is also medical device integration, clinical surveillance of patients with early warning scores, but also activity monitoring to enable better care to also enable better patient outcomes. Likewise, on the enterprise side, we have a very focused approach in enterprise, and we will come back to that in the next slide.
Basically, what we do there is also fast response, personnel safety, alarm management, task management, workflow automation in different enterprise verticals with the solutions that we offer, which is a combination of software solutions and mobility solutions for our enterprise customers. Now, around half of our business is software and services. The other half is hardware, and we want to keep it that way. I mean, we have a strong position in software and services. We want to grow that further, but also having the hardware solutions provides margin, provides barriers to entry, provides also differentiation. We are a hardware plus software company, and we are growing also the recurring part of our revenue. I mean, over the past couple of years, it has gone up.
Last year, we grew it by 2 percentage points, and we want to bring that actually to 30 and 30 plus percentage points in the next few years. A bit more detail specifically on each of these two segments. Starting with healthcare, we continue to see growth in that market. It might be a bit less than or less high than we had expected a few years back, but still there's significant growth in the different solutions that we offer across what we call the care continuum, which are the different parts of a hospital, starting with the emergency room, with the ICU, with the operating room, with also the general wards, with the rehab centers, and an extension also to care at home as patients are released earlier, but are still under a monitoring solution while they are actually at home and recovering still.
A number of important growth drivers, but equally a number of margin drivers. We're working on simplifying our portfolio, our solutions, making it also better, making it more cost-effective. I'll give more information in the next slides on that, but we're pretty fast advanced on that conversion in our platform. Basically, the solutions that we offer are multiple, but they're all centered on providing better care, providing more efficient care, providing better patient outcomes in the end. Likewise, in the enterprise segment. Enterprise is a good and growing segment for us. It provides additional growth, leveraging the portfolio that we have, similar type of solutions around critical communication and collaboration in industry verticals at large.
Now, next to growth, it is also an important margin contributor for the company, and we want to keep it that way, but by having a very focused approach in a number of our key enterprise verticals with a light touch go-to-market approach. Focused approach means four key verticals. I mean, it's industry, the wider industry at large, including power generation. It is the security sector, which can be prisons, which can be mental institutions, a bit similar to a hospital in terms of support systems that you need to have to manage these types of operations. It is also hospitality and retail in many countries, in Switzerland, for example, with Coop and Migros. Important solution, answer customer needs, but also very important margin drivers for the company.
There we are making, we have made the next step in terms of moving to cloud with our solutions, which will enable us actually to capture more growth in these different market segments. Our ambition remains to become what we call the key enabling platform across our enterprise and healthcare verticals. Key enabling platform, meaning the middleware to which the different systems connect, to which the data flows, and through which we offer various solutions to our customers in terms of alarm management, alarm orchestration, medical device integration, clinical surveillance, early warning scores, patient monitoring basically across hospitals and long-term care homes, and similar type of solutions in terms of workflow automation and others in our enterprise segment. Now, what is our focus? What have we done? What have we realized in 2024? What is our key focus for 2025?
We have embarked at the beginning of 2023 on a simplification of our portfolio, and we are pretty much advanced on that. We have actually already in 2024 launched a number of our solutions on our new platform, which is an integrated platform that combines different solutions, different products that we have in our portfolio. We are well advanced in that, and we will be across 2025 launching stepwise the rest of our portfolio on that new platform, and it will be completed towards the end of this year. This will be a major step ahead to make sure that we are best in class in the solution that we offer, but also that we can do it in a very, very efficient way.
In the end, this will also enable us to capture more growth at a better, let's say, cost profile and a better margin profile for the company. The second point is about cloud. I mean, some markets are moving fast to cloud. There was a gap that we had in our portfolio. We are today also capable to offer that already on a number of solutions, and we'll be completing that transition also in the course of 2025. Again, in enterprise and in long-term care, cloud solutions become more and more the standard, and this is a new step that we will be able to be present and launch and offer these solutions, cloud-based solutions also in these two segments. Again, it's an enabler for future growth.
It addresses a gap that we had, and it also enables us to enter in a number of market segments in which we were either not present or maybe not so competitive in the recent past. Go to market and our sales journey. A lot of things that we're doing there as well to take the next step in making our sales journey easier, more digital, and there's a number of steps to come also in 2025 to, I mean, simplify, improve our commercial tool landscape and make it also more relevant for our customers and partners and more efficient for us to do a lot of more self-service through our tools and portals. Last but not least, operational excellence. We've launched a simplification of our organization in the second half of 2024.
The new platform convergence will also enable us to be more efficient in the way we deploy our different solutions and operate our different solutions. These are two important elements that also bring benefits in making our company more efficient, which has a cost and a margin benefit for the company as well. Our focus, next to the point that I mentioned, our focus in 2025 continues to be on the two main regions in which we are present, which is Europe, which is the U.S., with future growth that we want to capture. Definitely in the U.S., I mean, last year was a bit more positive year in terms of growing our order base, growing our backlog to be converted in revenue in 2025.
We also made an important change in our leadership in the U.S., bringing a person on board that is very, very experienced in the healthcare market in North America that has a very strong track record also in sales, and we expect to see some positive improvements also in 2025 with that. We start the year, as I mentioned, in the U.S. with a strong backlog, but we are continuing with our focus on growing our footprint in the IDNs, which is the hospital networks, as well as in enterprise where we have some nice projects and opportunities that we are working on.
Next to the U.S. and Canada, Europe, a number of markets where we expect to see a continued positive traction, like in the Nordics, like also in DACH, with more growth to come, like in Italy, like also in a number of other countries on the back of the European Recovery and Resilience Fund, which is channeling quite some investments into healthcare. Obviously, there's a lot of discussion going on on the healthcare systems in Europe, on defense versus healthcare. Nevertheless, we remain positive that actually the solutions that we bring are needed, are key, and that we will also see continued investments in the years to come in Europe. Next to that, long-term care, very important. We have strong positions in several of our key markets in long-term care in Europe, and that is also given the aging of the population where we'll see continued investments.
A few examples and proof points of our wins in 2024. I'll just highlight two. One is in Italy with Almav iva, which is a partner of ours and with whom we are working on the digitalization of a big part of the ICUs of the hospitals, so the intensive care units of the hospitals with our solution platform. This is a flagship project, a major project for us, close to CHF 9 million in revenue, and it's a major step ahead to standardize the intensive care units across Italy on our platform, providing the whole alarming and also clinical surveillance of the different patients.
A second one, which is the last on the list here, is the Canton of Zurich, where not in healthcare, but in enterprise and in the security part of enterprise, we won last year a very important deal to also provide monitoring and personnel safety solutions across the different prisons basically in the Canton of Zurich. This is also a large project. I mean, it's around CHF 4 million. It's an important step as we expect also similar type of projects to be launched, not just in Switzerland, but also in some other places in Europe, in Germany and other parts of Europe as well. Looking ahead then, where does that bring us to?
I mean, our plan, our ambition, our commitment is to continue to work on a positive equity story with growth, with also a yearly EBITDA accretion on the back of a number of activities or actions that we have taken, which will lead to further growth. I was referring to our new platform. I was also referring to growing our recurring part of the business and enhancing further our position in Nurse Call, in mobility, in certain key segments, also in software. The last two points, which are basically on improving our cost base, and this will continue to be a focus for the company to work on that with simplification of our organization, with also simplification of our portfolio to enable a much more efficient deployment of our different solutions. Functional cost remains key going forward also in 2025.
A changed operating and service model of our solutions will be a key step that we want to take in the coming years as we deploy step by step our new solutions into the market. With this, I would like to move to the last part of my presentation, which is to give you an outlook on our guidance for 2025, which is for this year a low single-digit revenue growth with an EBITDA margin between 9%-10% based on constant currencies. We are obviously operating in a much more volatile environment today. We have brought our growth ambitions slightly down to a lower level. Nevertheless, low single-digit growth in terms of revenue, that is our ambition for 2025. Our focus is pretty much on this year's guidance and this year's financial outlook.
We operate in a market with quite some volatility, which is also the reason why for the time being we don't give a midterm guidance, but we will come back to that at the end of the year or actually early 2026. Now, the board also has announced a proposal in terms of dividend to the Annual General Assembly next month, a dividend of CHF 0.10 per share. Next to that, also a share buyback program of up to 10% of our outstanding share capital and up to a maximum buyback over the next 18 months of around CHF 15 million. This is an important decision. This is also, let's say, a proof of confidence that the board and the management have in the future of the company and also in the financial performance of the company.
Hence, the announcement that was made today to do an important share back over the next 18 months for the company. With this, I would like to conclude today's presentation and open the floor for questions and answers. As Daniel was saying, we have the live audience here in the room, but you can also ask our questions through the webcast online. I will take the questions one by one. Thank you.
Yeah, ladies and gentlemen, with this, we are coming to the Q&A session. As Nicolas already mentioned, participants on the Swisscom webcast are asked to use the chat function, and then I will read here the questions. We start first here in the room. Who likes to start with a question? No one for the moment. I start here with the webcast. We have a first question from Joern Iffert from UBS.
Joern asked, how do you see the sales performance in 2025 of healthcare and OEM?
Yeah. We, I mean, we're early in the year. Nevertheless, we have almost completed the first quarter, and the first two months of the year had a positive development. That's the first point that I want to say. Specifically on the question related to healthcare and OEM, we have a strong backlog in healthcare. A big part of our revenue, as Kalina also outlined, and that's about 50%-52% of our revenue today, comes from the backlog. Next to that, we also have some recurring business linked to extensions that we do on the install base, linked to replacement, linked to maintenance and service contracts. In healthcare, we have also a strong backlog.
Nevertheless, we are operating today in a much more volatile environment, which means discussions ongoing on investments in healthcare, especially in the parts of the world and Europe where you have a lot of public funding going there. Nevertheless, as I outlined in my presentation, we expect that the underlying trends remain positive. Likewise, for enterprise and OEM, we have seen last year a revenue development of around CHF 14 million in OEM. We do not expect this to increase substantially, but we expect it to remain more or less at the same levels actually as prior year. Thank you.
Thank you. We have a second question also from Joern Iffert . What is your assumption for the gross margin in 2025 and what can you do to improve it?
Let me maybe start with it and then I will give the floor to Kalina.
As we explained in the presentation, in 2024, there were some one-off effects that impacted the gross margin negatively. This effect will be neutralized in 2025, coming back to the prior year's level. It is our ambition midterm to continue to grow our gross margin, and we have also given a midterm ambition to get close to 50% or 50% gross margin on, let's say, the back of a number of actions that we've taken related to our cost structure, related to our platforms, and the efficiency of deploying our different platforms. This is a number of activities that we are taking to then step by step increase further over the coming years our gross margin profile.
Nothing to add.
We have a third question from Joern Iffert .
What is incrementally changing in the US in the go-to-market strategy as management was changed several times already in the past?
Yeah. We've brought a person on board who's a very experienced person in sales in healthcare, has had a very long tenure with GE, GE Healthcare and in sales. He brings a new impetus. He brings also a different approach in the way we want to go to the market, the way we want to, let's say, work with our different partners and customers. That is point one. Secondly, we are also focusing our U.S. sales organization much more on shorter-term projects, shorter-term deals, which will enable us to grow faster.
I would say if we look at the last two years' performance in the U.S., which was below our expectations, we had strong growth in our order and order backlog, but a lot of framed contracts, which is important to have, but which is not always, let's say, converted into revenue in the similar year or in the subsequent years. We want to change the focus more on projects that have, I mean, a faster revenue conversion cycle. The third point is also within our operations team focusing on accelerating that revenue conversions in 2025 specifically. These are a number of actions that we are taking to increase our growth actually in the U.S.
Yeah. Thank you. We have several questions from Reto Huber from Research Partners. First goes to Kalina.
The CHF 1.7 million right of provision and the CHF 0.6 million in cost of sales were both booked in the second half of the year or what is the split between the two halves?
The majority was booked in the second half. There was a small portion that was already booked in the first half.
Okay, thank you. Then a question for Nicolas. How many employees were laid off? How could the number of FTEs still be increased compared to the previous year?
We do not disclose the number of employees, but we embarked in the second half of the year on an efficiency plan, and hence we let go a number of people in the organization.
I must say that at the end of 2023 and also beginning of 2024, we planned on the expected growth in 2024, some increases in headcount of the organization in various areas, various functions, which led to an increase in the first half, but actually a decrease in the second half of 2024. Net net, we are more or less at an equal level at year start, but we are continuing to work on that in 2025.
Yeah. A last question I think from Reto Huber. Why could not the integration simplification project of the portfolio be completed in 2024?
We always said that the timeline would be up to 2025.
We take a stepwise approach and actually a number of our solutions today are already on the new platform, and we do it incrementally in the coming quarters also to bring the rest of the portfolio on the new platform. The timeline was actually completion between second half 2024 until end of 2025 when we complete the full transition of the portfolio. Thank you.
Thank you. I have no further questions on the webcasts. Are there any? Yeah, Michi, in a bit please.
Thank you very much. Maybe just a geopolitical question or governmental question. How do you see the move from budgets more to defense in Europe? I mean, I expect that a lot of hospitals are still financed by the government, obviously, so a lot of money will probably flow into defense going forward. How do you see that as a risk?
The second question is there is already a very specific discussion in Germany ongoing, and I assume that some part of that money will also flow into healthcare or at least digitalization of healthcare. Would you see that as a positive for Ascom or don't you expect anything to forward from that?
It is, let's say, a lot of moving pieces in the current macro environment, but there's a number of positive effects and there's a number of discussions indeed going on. On the positive effects are, I would say, the underlying trends, demographics and others, which you cannot change, right? I mean, this is something, this is a given, and it also means that actually they have to invest in, hospitals have to invest in making care delivery much more efficient and much easier.
The example that I gave in the Netherlands where over the next 10-15 years, normally around one out of four, one out of five persons would have to work in healthcare. I mean, this is impossible to achieve. It really means that care delivery has to be organized in a different way. That is the first point. The second point is the interest rates, which in 2023-2024 were still at very high levels, are coming down, and which is actually a positive point, not just in Europe, but also in the U.S. in particular, in order to increase again investments into the healthcare space, especially in the U.S. because the setup is much more based on private groups, private hospitals.
The third positive element is the European Resilience and Recovery Funds, which are being implemented in different countries, in Italy, NGEU, also in Germany, in France, in Spain. We have won a number of projects. We are also working on still a number of large projects in these different countries. These are the positive elements. Nevertheless, I follow your point as well that there's quite some moving pieces on budgets, reallocation to defense, and to what extent will this have a dampening effect on investments, especially in the public sector in Europe. We cannot make any bold statements on that today, but I think the underlying demographics and the way care has to deliver, has to be delivered, remains, I think, the more prevalent point that will drive continued investments in hospitals. Yeah. Thank you.
Any further questions here in the room? Yeah.
Hello.
I just want to ask about your midterm guidance. You postponed it or you canceled it totally. I'm not quite sure. You mentioned you will give some update maybe at the end of the year. Maybe can you elaborate a little bit on it? Why did you cancel it a little quietly just in the presentation, not in the press release? You did not mention it that you postponed it or canceled it in the press release. I was a little bit confused that you just mentioned it here in the presentation. Maybe can you give me some answers?
Our focus is fully on 2025. I mean, point one, we want to deliver our guidance for the year.
Nevertheless, in the slide that I showed with the equity story, we obviously are working on a number of positive things that will support the equity story development in the coming years. I refer to positive and profitable growth and also yearly EBITDA accretion. We have decided not to make any midterm guidance at this stage given the volatility of the markets in which we operate. We will come back to that later in the year. Thank you.
Any other questions? Oh, do you have any?
Yeah. Just one question about the U.S. market. Do you expect any negative impacts from the new U.S. government or it's one of your growth markets? I just have to ask it too.
No, it's a very good and important question.
Obviously, the new administration is creating some turmoil, not just for Ascom, but I mean, any company which is active in the U.S., and in particular, basically the tariff situation, I would say. Now, we source and produce in many countries. I mean, one being Mexico, China is another one, Thailand as well, and partly in Europe. We have taken a number of actions, are also considering additional actions. The action that we've taken is to build up a temporary additional stock in the U.S. to cope for the expected turmoil that could have happened. We did that starting at the end of last year, which is one point. Nevertheless, we are ready to increase our prices subject to the tariffs that are being implemented. This is a level playing field with many of our competitors in the U.S., which are also sourcing overseas.
There is a lot of, let's say, supply chain of electronics, which come from the Far East, including China. You have to look at it from a level playing point of view with your competitors. That is the second point in terms of potential price increases. Thirdly, supply chain and supply chain readjustments. Depending on how the final tariff situation will evolve in the coming weeks, we have also a number of scenarios ready to move to other locations to produce and source our goods. This is a moving situation today, so we monitor it on a day-by-day basis. It is a little bit volatile with announcements being made and being retracted. We have to manage it on a day-by-day basis with the scenarios basically that we have on the table.
How has the competitive environment changed?
Are you seeing new competitors entering this niche healthcare market? For instance, Logitech announced last week or the week before that they were trying to focus, that they were entering the healthcare market as well. Do you see more tech, big tech companies who have more software capabilities than you, like discovering this niche and becoming competitors to you?
Yep. It depends a bit on the different market segments. We have mobility solutions, Nurse Call systems, and software solutions. On the two first ones, markets are fairly consolidated. I mean, in mobility, we have a very strong position in our DECT with over 40% global market share. In Myco professional mobility, 4G/5G handsets, it is also a fairly consolidated market basically in terms of professional devices. Likewise, in Nurse Call, you have a number of large global players.
These two markets are more, let's say, consolidated. In the software arena, it is a very vast market with EMRs, with more nimble players in certain software areas. It is much more fragmented. Nevertheless, we have key positions in the activities in which we play, for example, in alarming, in medical device integration, in the whole personnel safety and fast response. These are key areas in which we have a leading position, obviously, with a number of other players as well in these types of markets.
Anything further here in the room? Otherwise, I think we come to the end of this annual finance conference. I thank you very much for your interest and for your participation. From my side, I wish you a great day and a lot of success. I think then we conclude this session. Thank you.
Thank you very much. Thank you.