Sirma Group Holding AD ($SIRM)

So good afternoon, everyone, and thank you for joining us. Welcome to Sirma Group Holdings Full Year 2025 Financial Results Presentation. Before we begin, just a few housekeeping notes. Today's presentation will be available in the Investor Relations section of Sirma's website under Events at www.sirma.com as well as on the Airtime Platform, and a recording will be published shortly after the event. This call is being conducted in English with German and Bulgarian translations of the recording to follow on Sirma's website and the German version also available on the Airtime Platform. Joining us today are Tsvetan Alexiev, Chief Executive Officer; and Yordan Nedev, Chief Financial Officer. Tsvetan will begin with an overview of the business, followed by Yordan with the financial results. After the presentation, we will open the floor for your questions. And with having said this, Tsvetan, over to you.

Good afternoon, everyone, and thank you for joining us today. I'm Tsvetan Alexiev, Chief Executive Officer of Sirma. And with me is Yordan Nedev, our Chief Financial Officer.

Hello.

Today, we will present our full year 2025 financial results, review the key strategic developments during the year and discuss how we are positioned for the next phase of growth. I'll begin with a brief strategic overview, after which Yordan will take you through the financial performance in more details. Before turning to the results, let me briefly introduce who Sirma is today. We are an established European technology group with more than 3 decades of experience and increasingly focused on AI-enabled growth and enterprise transformation. We combine international reach with strong local expertise, diversified sector exposure and balanced business model spanning IT services, enterprise software, proprietary solutions and emerging AI offerings. Long-term client relationships remain a key strength supporting [ repeat ] business and continued expansion opportunities. We believe Sirma is well positioned to benefit from accelerating demand for trusted, practical enterprise AI solutions. This is reflecting in business that generates EUR 57 million consolidated revenue in euro in 2025 with market capitalization of EUR 55 million as of 31st of March 2026. Over the past year, we have accelerated our transition towards an AI-first organization. AI is no longer stand-alone initiative. It is increasingly embedded across how we deliver services, develop products and run operations. At the center of the strategy is Sirma.AI Enterprise, our platform designed to help clients deploy AI securely, efficiently and at scale. Our focus is practical value creation through automation, decision support, productivity gains and measurable return of investment. Importantly, this also strengthens our own business model through more scalable revenues, improved margins and greater recurring income over time. Having outlined our AI strategy, the next important point is where we believe that value can be realized commercially. Our advantage is not based on generic AI capability alone, but on deep domain expertise in sectors where technology is mission-critical and operational complexity is high. For example, in financial services, AI is driving opportunities in risk compliance and customer engagement. In transportation and logistics, it improves efficiency, predictability and cost control. In travel and hospitality, it enhances personalization, revenue management and operations. Across all these sectors, one common theme remains, that is system integration. Enterprises do not need more isolated tools. They need AI that works with existing core systems, which has long been a strength of Sirma. We are also developing sector-specific use cases and accelerators that reduce implementation and support scalable delivery. As we look ahead, our focus is on scaling this opportunity. We are making our go-to-market approach more structured with a stronger focus on enterprise sales, international expansion and long-term client relationships. We are also investing selectively in priority markets and continuing to build partnerships to extend our reach and accelerate growth. At the same time, we see increasing opportunities with our existing client base where long-standing relationships support cross-sell and upsell. Overall, we believe this positions Sirma well for the next phase of profitable growth. With that, I will now hand over to Yordan Nedev, our Chief Financial Officer, who will take you through on full year 2025 financial performance in more detail.

Thank you, Tsvetan. And again, thanks, everyone, for joining for this issue of our financial results. Starting with the geographical distribution at Sirma, we remain predominantly a European company focused in the European market with about 80% of sales done there and North America accounting for about 10% and the U.K. for about 8% of our revenues last year. Probably a thing that's worth mentioning here is that the fraction of Bulgarian revenues is also relatively high for last year due to a few large government projects that we won and delivered throughout the year, something that may not repeat this in the following years, although we are quite well established on that respect as well. In terms of future development of geographical markets, we started -- I wouldn't say unfortunately, but you would understand what I mean by telling you that we opened an office in Dubai last year. Then things happened, as you know. So the Middle East is quite hindered nowadays in terms of business opportunities. But we never look at one place only to further extend our business. So we have been strongly looking and even more so today and the months to come to the farther part of Asia, specifically APAC, Japan, probably China, Singapore, et cetera. So we much believe that this further diversification would play a good role in our future growth. That should not be as much disturbed from what's happening as much as it would be if we didn't invest in all spaces of our planet actually. Yes, we've grown 31% last year. Part of it, maybe a smaller part is due to organic growth, about 10% to 12%. The rest is due to the consolidation of our newly acquired in 2024, Romanian company called Roweb, but this is how we grow extensively and organically. And this is what we plan for the future as a whole. EBITDA sits at EUR 5.3 million, substantially higher than last year, but being at 8% is not 8% of margin, is not something that we would say that we are particularly proud of, and I'll say why. Net profit at EUR 2.1 million is about 3.15% of revenues. Again, a digit that is far below what we are aiming at in the long run. But for the long run, we need to invest. And this is why our margins are at this level this year, I mean, already last year 2025 and the previous one. Probably 2026 wouldn't be much better because we continue our investment in business development, in sales and marketing, in product development, our Sirma.AI Enterprise platform is constantly being developed, et cetera. And potentially, we would be opening new markets around the globe. This all consumes quite a lot of resources. Last year, our share price rose significantly due to all good news related to our growing business to the double listing on the Frankfurt Stock Exchange and many more. Unfortunately, at the beginning of the year, still raising a lot, the price, if you remember or if you don't know, our price got to close to EUR 1.4 per share, and now it's down to less than EUR 1, mainly because of the new war that burst in February, March and also because some of our investors were taking profit. Last year, we distributed some dividend. We've been doing that in line for more -- for about 4 years now. And this is our strong impetus to go with that hopefully forever. So if you're going to ask later on, we would propose a dividend distribution for last year as well. In terms of segmentation of our business, it's pretty much what we've seen before. And whoever has visited our reports delivery 3 months ago on the same platform, I would notice that things haven't changed much in terms of segmentation. System integration sits at about 40%. IT services that are outside our main knowledge domains is also at 22%. And the rest of banking, financial services and insurance companies is one of the strongest knowledge verticals at 13%. Strategic development includes pretty much everything that has not yet graduated from -- as a knowledge vertical because of its revenue relative insignificance, I would use that word, even though it's not correct. For example, transportation and logistics is at about 6% of total revenues. As soon as it gets close to 10%, it would graduate from the strategic development and become a separate visible vertical on this pie as well. Hospitality is also below 10%, but this is because results oscillate quarter-by-quarter. It used to be above 10%, then system integration took over a bit. That's why hospitality went a little bit below 10%. And still, it's a major one. We invest a lot there, quite some AI development as well as in the transportation and logistics. So things are very much intact with our strategy that we've spoken about many times already. The only outlier here, so to say, is probably manufacturing at only 3%, but this is a very special market. It's very separate from the rest, and that's why we show it separately. In terms of recurring revenues, we've been oscillating about 40% quarter-by-quarter. Currently at 38% because, as I mentioned before, we had some major one-off government projects this year. That's why it pumped up the nonrecurring revenue. Our long-term goal sits at 60%, 65% for the next 3 to 5 years for sure, maybe earlier, depends on the market, but you see it's quite unpredictable as of today. How we imagine to get to this 65%, predominantly through sales and application of our Sirma.AI Enterprise platform that we are pretty much integrating in every new project we start. In terms of division of the recurring revenues, most of it comes from managed services, then comes the long-term contracts. By long term, we mean at least 3 years, but mostly, it's 5 plus. And then the natural ones for this category, which is subscriptions, licenses, maintenance and support. We are heavily and steadily not concentrated in terms of customer base. The biggest client accounts for about 6% of total revenue, top 5 is 23%, top 10, 34%. This is something that actually gives us edge in summer times because we do not depend on a single or even 10 customers, and that's why it's somewhat easier for us to survive heavy times. Ultimately, and one of the most important things, financially speaking, the cash flows, pretty stable. We do have operational positive cash flow. And you may see that it's pretty much invested in all the other things we do like product development, buying companies, et cetera. It's quite a balanced cash flow statement, unlike the previous one we showed for the third quarter of 2025, which didn't show this picture, but then I explained that it's because the fourth quarter is the strongest one in our company in terms of cash generation. And the first quarter is actually the worst where we spend money on deliveries and stuff. So generally speaking, our cash generation is at a good enough level, and we expect it to be even better in the future to come. So on that note, I'll be ending this presentation, and now we would gladly open the floor to any questions you might have. Thank you.

Thank you very much. And ladies and gentlemen, we are now opening up the Q&A session. [Operator Instructions] We already got a question. I'll read this out for you. 2025 was clearly a strong year for Sirma. How has the market volatility since the beginning of 2026 affected the business? Do you see any risk to performance going forward?

Okay. We all are witnesses of the geopolitical problems. And Europe is a little bit uncertain about the future. But until now, we don't see any problems in our business operations. And even the challenges related to war to supply chain problems open doors for implementing to our customers solutions that reduce cost or open new revenue stream channel.

So actually, we got an interruption in the connection to Tsvetan and I'll hold on for a few seconds because we can't hear you at your office Tsvetan and Yordan. I'll wait a few minutes because there seems to be a problem on the side of Tsvetan. Well, yes, we can hear you.

Yes. Do you hear me?

Yes, we can hear you perfect.

Okay. So I'll repeat the same statement. Okay. There are geopolitical challenges, but this opens -- sometimes they open us doors for business because right now, companies in Europe, they are trying to find solutions that are helping them cutting costs or open new revenue streams. And that then comes with our strong AI solutions and products in our key industrial verticals where we can help them with that. I mean we still don't experience any challenges and troubles in our business operation despite the situation.

It is Ridsdale. Yes, we can hear you. Perfect.

Just wanted to ask a question about the enterprise AI product in terms of what you're seeing in the market. With that product, is that something that is opening new customers up for you? Or are you primarily seeing this as an upsell opportunity with your existing customer base? And then also looking at the competitive environment, there's a lot of AI solutions emerging out there. And there seems to be quite a lot of noise in terms of enterprises, a lot of people approaching them with their own solution. Would you be able to give us a bit of detail in terms of how you differentiate yourself and rise above all of that noise in the market?

Yes. Of course, I will do. Maybe I will explain a little more about our core product, theSirma.AI Enterprise. This is a platform that allows building an enterprise AI solution. Yes, we have competitors, but our competitors are mostly biggest American companies like Microsoft, OpenAI, Amazon, Google. Now in Europe, we can see the very strong desire for digital independency and AI independence. Also in Europe, there are a lot of regulations. We have AI, we have GDPR, we have DORA, we have NIS2. And with our enterprise AI platform, we follow all these regulations and our customers can be very calm about not violating anything that is a regulation in Europe. So in that point, we don't have too much competitors as European vendors of such enterprise AI platforms. In addition, with our expertise in the strategic industries, our strategic industries, these are, as Yordan mentioned, BFSI, travel and hospitality, transportation and logistics, health care, retail, some public sector manufacturing. We understand very good the customer needs, our customer needs and problems that they have. And we can build on top of our enterprise AI platform, the very powerful solutions that solve these specific problems. So as a positioning and timing, I think we're just in place and on time.

And the other point about -- do you see many new customers? Do you think this product will help you win new customers? Or is it at the moment primarily something that you are selling and implementing with existing customers?

Actually, just now we are building a strong partnership with some of the biggest companies in Europe for making a common proposal in the terms of enterprise AI. Maybe we will announce the first one very soon. We sell our solutions and the platform to our existing customers also, but we are working and we have quite aggressively started selling to new customers, looking to new opportunities and -- so this is in both ways. We don't just lay on the existing customer base. We are also very aggressively chasing new customers.

Mr. Kindermann, you should be able to unmute yourself and place your question.

A couple of questions from my side. First, I want to follow on the Sirma.AI Enterprise platform. Maybe you can share which like revenues you are already generating and what are the expectations for this in the next years for this product? And then the second question would be, if you can share any update on the M&A activities?

Okay. Yes, I will do this. For M&A, will answer. I will talk about the platform. Actually, the first release of the platform was at the beginning of this year, somewhere in January or February. But even on pre-release stage, we had 2 sales in United States, both for $50,000. So for the last year, it was just $100,000. For this year, our plan -- this is a very new product. So our plan is to reach EUR 1 million of sales and for the next is between EUR 5 million and EUR 6 million. And after that, we're aiming some digits around 20, but we'll see.

Regarding the M&A activities at Sirma, they have since -- for about 7, 8 years now, they haven't stopped for a moment even. Currently, we are contemplating a company far away from Europe in a domain vertical that we have and want to develop further. We are actually in the middle of the road, if I can assess it this way. We've done some internal due diligence on the company. Now we are close to contracting an external auditor to take a look. We've been partnering actually with the company for some time now. And so we know each other well. And we are quite happy if we could join forces. So there is a high probability. I cannot say more. And the other thing is that I cannot say anything more precise than high probability because we had a high probability deal a year ago, which failed at the very, very end. So things happen, turbulent times currently and ahead of us. So we don't know, but we are absolutely constantly without stopping at all searching for new targets that would fit into our structure. So that's it.

Yes. Thank you very much. And there is another pretty straightforward question in our chat box. Following the strong performance in 2025, should investors expect a dividend this year?

Well, as I mentioned, as far as it's something that internally, we have to decide and propose, we've done that already. We've issued today actually our invitation for the general assembly of shareholders in which there is a proposition for a dividend payment based on last year results. It's in the amount of -- if you divide it by the number by -- I mean, the amount by the number of shares, you would get something like EUR 0.015 per share. This is a proposal for a dividend, which is a little bit higher than last year. Whether the general assembly would vote for it, we don't know yet. We are about to know it on the 18th of June when it would happen. So yes, we have proposed and it has to be voted for.

[Operator Instructions] There is another one. Why should investors look at and invest in Sirma right now?

Okay. Sirma is not a small European company. We are mature, we are aggressive and we are developing. We have strong knowledge and competence in artificial intelligence, which is hot for the market now. And we combine this expertise with strong expertise in several industrial verticals. So we are able to address them and to build powerful solutions. We have succeeded to change our business models even in advance of the global change to change to be AI-first organization to bring AI both in development and in our products and proposals to our customers. We have very strong technology. We have a lot of talent in Bulgaria, in Romania, in Albania. So I believe in our future. So that is my answer.

And I really very much like to add one thing that Sirma has accumulated a very long and a very strong tenure of surviving crisis. Because we are a Bulgarian company that started in 1992, you can't imagine believe me, what it was back then, how many crisis happened only in the decade that followed and then all the global stuff that happened, the dot-com boom, the financial crisis, all the worst, et cetera, and we are standing and growing and profitable and cash generating. So we will survive.

Well, thanks very much for this strong statement, and I'm waiting for more participants placing their question. And that's not the case by now. So with no further questions on the line, we come to the end of this earnings call. Thank you very much to the participants and their interest in the Sirma Group Holding. A big thank you to the Board, to you guys for the presentation. And should any further questions arise, this is addressed to the participants, please feel free to contact Investor Relations of Sirma. From my side, I wish you all a successful end of the day and handing over to you, Tsvetan, once again for some closing remarks of this call.

Thank you very much for your interest in our presentation, and welcome to invest in Sirma, and thanks for the questions a lot.