Sirma Group Holding AD (SIRM) Earnings Call Transcript & Summary

Hello, everyone, and a warm welcome to the European IT Services Summit. It's a pleasure to have you all here today, and this session is dedicated to the Sirma Group Holding, a public company since 2015 on the Bulgarian Stock Exchange and who will receive its second listing on the Frankfurt Stock Exchange later this month. Today Sirma is represented by their CEO, Tsvetan Alexiev as well as CFO, Yordan Nedev. So the gentleman will guide us through the presentation shortly. Please note that this call is being recorded, and the recording and the presentation will be available on our platform afterwards. So with this, let's start, and I hand over to you, Tsvetan.

Hello. Thank you, Sara. Hello, everyone. Before we go into the numbers because it is a financial presentation, let me briefly explain what kind of company Sirma is today. Sirma is European AI-led technology group focused on delivering complex enterprise-grade solutions for organizations operating in regulated and data-intensive environments. For more than 33 years, we have combined deep industry expertise with advanced capabilities in artificial intelligence, data and system integration. We operate across several verticals, including BFSI, travel and hospitality, manufacturing, retail, transportation and logistics, health care and public sector, where reliability, security and continuity are critical. Our business is built on long-term partnerships and repeatable delivery models, which allows us to generate measurable outcome for our clients and resilient revenue profile for the company. As we expand our presence across Europe, our ambition is to strengthen Sirma's position as a trusted enterprise AI partner supporting organizations through complex transformation. We have made significant investments in the developing of Sirma.AI Enterprise, an agentic platform designed to help organizations embed artificial intelligence across multiple areas of their operations. The platform enables scalable and practical AI adoption from core processes to advanced decision support. It is built with a strong focus on data sovereignty and security making it critical pillar of enterprise AI transformation. Highly advanced by design, our ambitions is to Sirma.AI Enterprise to become a leading and dominant European AI solution. With that context, let me now share a few key facts and figures that illustrate the scale of the business today. The revenues that we expect for 2026 is about EUR 65 million. In Sirma group, there are more than 800 professionals and CMO operates in IT services and enterprise software combining long-term delivery and proprietary technology and AI capabilities. As I mentioned, we were founded in 1992, which means we bring more than 3 decades of experience in building and running complex systems. We have been a publicly listed company on Bulgarian Stock Exchange since 2015. And in February 2026, we will complete our dual listing on Frankfurt Stock Exchange. This is an important step of our European capital markets journey. Our solutions are used by customers in more than 170 countries worldwide, reflecting the global relevance of our expertise. We operate in 8 countries, which allows us to help our customers internationally. Our main markets are Europe, which accounts for 78% of our revenues followed by North America with 11%; U.K. 8%; and the rest of world 3%. Europe remains our strategic anchor reflecting our strong regional presence and deep industry expertise. In the coming years, we plan to increase our footprint through targeted investments in Middle East and APAC region. These investments are aimed at delivering -- at diversifying our revenue base and accelerating our global growth. Here is a quick snapshot of some of our biggest clients. We are proud of them with whom we built long-term trusted partnerships. They include some of the world's largest multinational companies and organizations. Together, we create sustainable value with deep collaboration and share our common long-term vision. Now Yordan Nedev will present our financials.

Thank you, Tsvetan. Hello, everyone. Sirma has been showing some stable growth in the last decade. It's been around 13%. What's probably more important even that in the past 5 years, this ratio has been even higher at 15% growth on average per annum. And another interesting thing would be that even the previous decade, we've been enjoying more than 20% of CAGR for about 10 years, but of course, one of the reasons there would be that we started at a lower base. Except for growing 4x top line or close in the past decade, we've increased our number of employees twice, the productivity of these people has risen more than 2x. We have given back to our shareholders about EUR 8 million back through -- sorry, dividends and stock buybacks. Our shareholder base has risen 78%. Fortunately, our share price has grown quite substantially. And what is most important here is that for the first month of 2026, our share price has risen with another 30%. In terms of consolidated financials, as Tsvetan mentioned already, we are expecting about EUR 66 million in revenue, which is about 30% up from previous year, about EUR 5 million in EBITDA and EUR 1.8 million in net income. We can admit here that our profit margins are not formidable as yet. But there are a few good reasons for that. We are heavily investing in research and development, in sales and marketing organization, in bizdev. We are acquiring companies, and we are reorganizing ourselves internally, which obviously consumes quite some resources. In terms of indebtedness, we consider ourselves lowly indebted. Of course, this thing would change probably already this year if we acquire another company because part of the financing of these deals we make through bank loans because they are readily available and quite cheap at least for us in Bulgaria. If we split our revenue by different types of expertise that we deliver, we could easily split it in 2 main streams. One would be horizontals and the other knowledge verticals that we possess. The horizontals of system integration, which is actually sales of hardware systems, setup and maintenance as well as DevOps would take about 1/3 of our revenues. The enterprise solutions that we deliver across the industry take a big chunk as well. In terms of specific knowledge built upon the years and that we have developed further into huge business lines would be financial industry where we serve all types of banks, insurance companies, payment operators, et cetera. Hospitality and travel is another vertical that is quite well developing, and we put a lot of effort in it and it's growing stable in time. In strategic development, we put all our knowledge-based verticals that are not -- that have not yet graduated to be shown as stand-alone verticals even though we consider them as such. One of them is the software for the retail business, but another most prominent would be the logistics and transportation, which actually we expect to graduate as a stand-alone shown up here on such a diagram already this year because we expect it to go beyond the threshold of 10% of revenue quite soon. The manufacturing -- the software for manufacturing industry is low at 4%, but we show it separately because it's a niche market that it serves. It's a stand-alone daughter company, and it holds second market share globally in the packaging industry. In terms of recurring and reoccurring revenues, we've been growing as well on this slicing since the inception of 2025. We started a year ago at below 40% of recurring revenues. By the end of third quarter we've grown to 43%, and our long-term goal is 65%. Of course, part of this commonly called recurring revenue, there is reoccurring revenue of the likes of managed services and long-term contracts. But definitely, the support and maintenance and subscription and licensing model is growing based predominantly on our Sirma.AI Enterprise platform that was mentioned before. In terms of concentration, we consider ourselves heavily not concentrated because our top 10 clients account for less than 1/3 of total revenues and the biggest client with a proportion of 6.3% only. Finally, our cash flows. As we mentioned before, we've been investing hugely. So our operating cash flow is kind of balanced. We don't produce much cash on a yearly basis and it would probably hold true for this year, for sure, because we are still investing in all of the things that I mentioned when we spoke about profit margins. Actually, in this view, we don't have the fourth quarter of the year just because on a consolidated level, we are not ready with it, which is usually the strongest one in the year in terms of cash generation. And it's proven by our individual results that were published last week. And on an individual level, our operating cash flow has risen in the fourth quarter by more than EUR 2 million. So we expect these numbers to be better for the full year 2025, but this is the view that we have in present. So that's our short financial overview of the company. And thank you very much. Happy to take your questions.

Thank you so much, Tsvetan and Yordan, for your presentation. [Operator Instructions] So by now, we have no virtual hands, but we have a question in the Q&A. So what is the rationale behind the dual listing of Sirma on the Frankfurt Stock Exchange?

Okay. I'll answer this question. The reason for our double listing, there are many reasons, of course. First, maybe you know about the Bulgarian Stock Exchange is not very big. It has sometimes a lack of liquidity, but this is not the most important thing. It is a good stock exchange, and we are happy that we are on it. The reasons are two. We plan in maybe next year to try to increase to get some financing for the stock exchange because we will need an additional money to power up our ambitions for growth and penetration on different markets. And the second reason is, of course, that we operate in DACH region and our presence on Frankfurt Stock Exchange will build even more trust among our clients.

So now we have the next question. So you mentioned that Denmark is involved in artificial intelligence. What is the positioning of Sirma in this field? And what are your plans?

We have founded Sirma in 1992. And the interesting fact is that the first name of the company was Sirma AI. So even that time, our ambition was to do artificial intelligence. Imagine artificial intelligence back in 1992. It's not like today, of course, but still, we did a lot of interesting projects at the beginning for Canadian government, for American companies. The artificial intelligence that time was mostly expert system, some neural networks. And since then, the artificial intelligence in our genes. In every project, in every product, we started, we tried to put some AI technology in our software. And now when the revolution around AI just happened with large language models, we are like fish in our own waters. So we gathered all our knowledge in artificial intelligence, in our Sirma Enterprise platform. And currently, we help organizations during their transformation to become AI-ready and AI-assisted organizations. We have many such projects, and we can see, okay, United States are more prepared and more advanced in that direction because currently, most of our projects in United States, they are around artificial intelligence. But in Europe, our ambition is to become a leader in the process of AI transformations of the companies and organizations.

And by now, we have one more question left. So if there are still open topics you would like to discuss, just let us know. And by now, last question is, what are Sirma's growth drivers?

All these years, we exist, entrepreneurship is in our book. We tried started a lot of products, a lot of different ideas, some of them failed, some of them were very successful. So this is driving us to experiment, to make research and development to try to get into the new markets into the new niche and now the artificial intelligence is that we always were in it. It is now very stimulating for us to try to do more and more in this area.

All right. Thank you. In the meantime, we received another question. So you are specifically targeting European organizations with the platform. How is it designed to meet the particular needs of the European market with regards to futures -- to features such as the security, data sovereignty and ETC?

Yes. In my presentation before I mentioned that this is one of the focuses in our platform, data sovereignty and security. Also, we are one of the not-too-many platforms in the world that allows us to run local models, local large language models. We encourage organizations to go also in that approach to try to have on-premise AI capabilities that allows them to hold data inside the organization, at least inside Europe. Our technology -- okay, but there are some cases that customers have to use big names because the American models are dominant. They are huge. They are very good. So in that case, we implement, again, AI-assisted level of security that, for example, anonymize data before sending to the big models after it deanonymizes the results. So we take care really very strong about security and European regulations.

All right. Thank you. So by now, we have no written questions, but we received a virtual hand from Philip. [Operator Instructions] That's maybe -- okay. Now he has written the question in the chat. So just a short question. Will you publish reports in euro?

Actually, 2025 is the last fiscal year for us that we are obliged to issue our reports in Bulgarian lev, a currency that does not exist anymore. And since we are already in the Eurozone since January 1, from now on, all our reports would be in euro only.

All right. So then with a view in the queue, there are no further virtual hands. So ladies and gentlemen, if there are still anything you would like to ask, just let us know. Otherwise, we would come to an end, but let's wait a couple of seconds, maybe another question shows up, but it seems everything appears to be answered so far. So therefore, we will come to the end of today's roundtable of the Sirma Group Holding. So thank you for joining, and your shown interest. And also a big thank you to you, Tsvetan and Yordan, for your time and the presentation. So for some final remarks, I would like to hand back to Tsvetan and wish you all from my side a lovely remaining day.

Thank you very much, everyone.