Tecnotree Oyj (TEM1V) Earnings Call Transcript & Summary

[Audio Gap] My name is Thomas Koponen. I am the Head of Investor Relations, taking over for Timo Holopainen. With us today, we have CEO, Padma Ravichander; and CFO, Indiresh Vivekananda. I will be opening the questions and answers in the chat in just a few moments. We will be bringing up all the questions and answers at the end of the presentation. Without further ado, please, CEO, Padma Ravichander.

Good morning, everyone, and welcome to our Q4 2024 results presentation. Along with me is our CFO, Indiresh Vivekananda. I will give the quarterly highlights and the guidances and a bit on the strategy and the actual results presentations of the Q4 performance of the company and the 2024 performance will be guided by Indiresh. Thank you. Can we move to the next slide, please? One more. As you all know, Tecnotree is a global expanding BSS provider. We are in the top 10 globally. We service over 1.2 billion subscribers worldwide. We have recently acquired a lot of Tier 1 telcos, as you can see in this canvas. When I started the journey at Tecnotree in 2011, there was no more than 2 big customers, 1 in Latin America and 1 in Africa. And it's quite interesting to see how the canvas has developed. And today, we boast with more than 90-plus service providers globally being supported by our technology and platform and our capabilities from our resources worldwide. We do have follow-the-sun model in terms of operational support and to support these customers and multiple network operation centers across the globe. Today, the stack is full with 4,200 features. And I'm proud to say this year, I think we had something like 20 concurrent go-lives for all the acquisitions of licenses we did in 2023, which will definitely turn into ARR models in the coming years for us. So it was a very, very pivotal year. I want to say 2024 overall has been pivotal, but we have handled it in an agile way with our SISU spirit. We started the year with deep ForEx losses, as you remember, in Q1 and because of the currency fluctuations in the naira. That continued with geopolitical situations and the slowdown in the market. We also had made commitments to exit markets that were highly sanctioned or where political risks, and we had to continue to execute those terminations adequately. And we also exited businesses that were non-telco that we acquired initially when in 2022, we acquired the CognitiveScale. So in multiple fronts, we had to hone in the business and ensure that we are focused on the segment that we want to serve and grow in that segment. What I am abundantly happy about is the outcome despite having these challenges in front of us, the way we have pivoted through and navigated through these challenges in 2024. If we can move to the next slide. It's abundantly clear despite these challenges, we were able to meet the guidances that we had given for 2024. In terms of constant currency, we had promised to deliver 2% to 7% of growth in revenue. We delivered 4% growth despite deep fluctuations, both in the Argentinian peso and in the Nigerian naira that started in Q1 of this year. However, these currencies have been stabilized, and we have also been able to negotiate better terms with some of these customers and also move some of the operations to dollar denomination type of payments. On EBIT, we had promised 7% to 15%. We delivered 9% in constant currency. A lot of that benefit came from the deep cost-cutting measures we took in Q2, and I'll talk a little bit to that. And finally, the most important and most significant achievement, I would say, of 2024 is the free cash flow. For 3 consecutive years, Tecnotree has posted positive free cash flow. This was a resolve that we took in April of 2024. And I'm proud to say that the entire management team worked extremely hard despite working in difficult markets with customer payments that are cyclical in nature and revenue invoicing, which is also fairly cyclical. The other big achievement for the year is in the beginning of -- in the latter part of 2023, we made an entry in the telco space in the U.S. market. And through 2024, we aggressively work to create a footprint in the U.S. market. All the CapEx investments we made with our prepaid customers in Africa and Middle East and the standardization of the stack as per TM Forum Standards, the relationship we developed with a Tier 1 SI player in the U.S. market all yielded us a fantastic result by winning a Tier 1 telco customer on our digital platform. So clearly, we were able to prove that the investments that we made and the effort that we took to enter the American market was well rewarded. Finally, we announced based on the slower revenue growth and the slower order intake growth that we would administer cost reductions across the company. This was also propelled by the fact that we had 4,200 features and a fairly mature stack. We had promised to deliver EUR 4.5 million in cost reductions, but the company actually exceeded that expectation and delivered EUR 6.9 million of cost savings, which definitely helped in ensuring that we met the free cash flow guidance for 3 consecutive quarters. Can we move to the next slide, please? I now want to get a little deeper into some of the guidances given and the revenue performance and the EBIT performance. If you look at the typical revenue growth of Tecnotree over the years, I've taken a 3-year view, it's very cyclical in nature. And what we plan to do, I think, mid-2023 was convert our model into a more predictable ARR, annual revenue recognition model, and we started the journey in later part of '23. In '23 end, we acquired 2 customers in the ARR model. By the end of 2024, I'm proud to say we have 10 customers who are now on the ARR model. And the ARR model, if you look at the 2024 revenue has provided a more stable growth in revenue quarter-on-quarter, which is exactly what we had expected. Also in terms of the growth in ARR business itself, you can see that in 2024, we had a lot of license revenue that we had taken in Q4 of 2023, which gave us a high revenue of EUR 22 million in 2023. In 2024, we delivered the projects around those licenses that we had sold. Therefore, the project delivery revenue increased. And finally, the overall revenue in terms of constant currency also performed and the ARR revenue growth is also shown here in the graph. The other important movement on revenue was the acquisition of a North American Tier 1 telco. And if you look at our order backlog, the North -- the American business in terms of order backlog is growing. And in terms of growth in the telco revenue in North -- in Americas, we've seen a 40% uptake, and that is certainly rewarding for the efforts that we have put in to enter this new market. Can we go to the next slide, please? On EBIT performance, clearly, the strong message here is the cost reductions that we administered in April of 2023. This was mainly because we wanted to give a free cash flow guidance for the company, and we wanted to ensure that the company has an operative cash -- positive cash flow month-on-month. And that strong operational alignment ensured that we even though had a lower revenue overall in actual terms in 2024, our EBIT margins grew much higher, and we recovered with a positive free cash flow. So the cost reductions worked in our favor as we also faced a bit of an economic slowdown in terms of revenue growth. Next slide, please. The last guidance was on free cash flow, and this is a very interesting chart. I have looked at 3 years of free cash flow that the company has been posting in the last 3 years, '22, '23 and '24. And as you can see, even as late as the last 6 quarters before Q2 of this year, the company posted negative free cash flow. And despite working in difficult geographies, despite having foreign exchange losses, exposures in markets like Nigeria and continuing to serve some of these customers, we took a very strong stance that we will, in H2, post a positive free cash flow between EUR 2 million to EUR 5 million. And I'm proud to say that we were able to achieve this through the cost regulations that we put in place, the Think Cash Do Cash policy that we implemented in the beginning of the year, the tracking of all payments, all invoices and all due receivables have definitely benefited us. And in addition to that, we started notifying our customers that if we do not receive payments on time, services will be stopped. And these policies, along with the ARR approach of more predictable revenue, more predictable invoicing has definitely helped improve the free cash flow. Cash collection for the company continues to remain a challenge, mainly because we work in difficult markets where foreign exchange in dollar denominations are sometimes hard to find and some currency fluctuations are still there in the African markets, although all of LatAm now is in dollar denomination. We still continue to have seasonality in the collections, which Indiresh will explain more on the receivables side. But we have continued to lower our exposure to these currencies, and I will share with you the new metrics that we have been able to achieve in terms of foreign volatile currency exposure. Next slide, please. One of the other guidances we added during the course of 2024 was CapEx to sales. The company had been steadily investing in creating a digital stack in creating a moat by having more than 60 APIs that were standardized so that the integrations can be fast, and our implementation cycles will be more rapid. And we also have invested a lot in creating out-of-the-box journeys, as you can see, 4,200 features. All of this paid us really well in terms of our entry into the North American market. But now I'm proud to say we are at a place where we can start reducing the CapEx. And as of the second half of 2024, we started reducing our CapEx investments in the product stack because we have a mature stack. We have a configurable stack that can be configured by the markets we serve and the customer needs and profiling that we are trying to meet. However, the guidance is that by 2025, we'll reduce the CapEx to sales spend to 10% to 12%. I truly believe we are on a good step towards it. And we have taken sufficient impairment, as you can see, EUR 6.1 million in '24 and adequate impairment in 2023 as well. So we'll continue the aggressive impairment guidance as well. Next slide, please. The next point that we had given guidance on for '25 was to ensure that we -- over the 3 -- next 3 years from '24 to '25 to '27, we will reduce the currency risk exposure to 10% to 15% from what it was 45% in 2023. As you can see in this chart, already, we have touched an 18% mark. We have converted all the LatAm contracts into dollar denominations. And we also see that the naira is getting more stable. The currency fluctuation of the naira to the dollar has stabilized mainly because of the oil production increases and the stability of the Nigerian economy. And the prediction from the analysts is this should continue, but we will take no chances. We are prepared to continue to revisit the currency risks and take precautionary measures as required. Moving on. Finally, I wanted to touch upon why today Tecnotree is investing in partnerships. As we enter the new mature markets of U.S. and Europe, we find that the synergies that we are able to deliver, develop through partnerships. One, for scaling our capability to deliver, and 2, to attract new customers and create the spread of our products and services across the market. We need partners in these mature markets. And I'm delighted to say that we started with one partnership with HCL Technologies, which we announced midyear last year. Several more partners are being onboarded and several assignments are underway. And as deals unfold and we are able to ensure that these partnerships bear successful revenue growth, we will continue to share with you the outcomes of these partnerships. But why did we start these partnerships now? Today, we have a stable stack, which is TM Forum-certified. In fact, even Gartner has recognized us in their Magic Quadrant for AI and AI capability. And working with these partners, we find that our ability to scale our delivery capability very quickly as well as continue to grow our market share is quite promising. And I hope this bears good outcome in 2025 and beyond. Next slide, please. Now for our guidances for 2025. We have now presented these guidances in our report already. Given the fact that the growth in BSS market share has been advised to be at 0% to 2% by many of the analysts in the market, we are predicting a low to mid-single-digit growth as a percentage growth on revenue for 2025. That is in constant currency terms. EBIT margin, we have said that the margin would be about 200 basis points or 2% growth in EBIT overall. And we have improved our free cash flow guidance from greater than EUR 3 million to greater than EUR 4 million for the full year of 2025. The additional guidance that we had given on DSO days to reduce our collection and exposure for aged receivables to 100 to 140 days. We will continue to work on it. It is definitely challenging with large Tier 1 operators to push them to pay faster, but we have plans to improve that through our ARR models and the partnerships we have with SIs. The CapEx spend, as I've already explained, we have brought it down in 2024, and we'll continue to reduce the CapEx to sales spend to 10% to 12%. We announced a dividend policy first time in the history of Tecnotree, and we also issued a dividend. We plan to continue to comply to the policy that we have announced and hopefully improve it over the course of several years. Finally, reducing our exposures to frontier markets and bringing the risk on foreign currency down to 10% to 15%. Some very good steps have been taken in 2024 with Latin America and with the African markets, and we will continue this journey and focus on ensuring that such risks do not unduly put pressure on our free cash flow. Finally, as a parting comment, what I want to say is while the industry is going through challenging times, I think Tecnotree again, has been a champion in terms of sensing the market conditions and predicting how the market will shape into the future growth for BSS and telecom industry. One of the biggest revenue-generating capability that is going to come through telcos is the whole onset of the artificial intelligence and machine learning capability. If you look at the market today, it is abundant with several generative AI models, many of them are open source and freely available, challenging OpenAI and companies like that. There is abundance of compute power available, thanks to companies like NVIDIA. But what is really not available in the market to make AI/ML as an industry game changer is the fact that there isn't real data available to drive these models and to move them from being explainable to more predictable and more intuitive. And there is the opportunity for telecom operators who today have massive networks globally and have a large amount of data. It said that annually, there is more than 180 zettabytes of data swimming along the network all over the place. And the access to this data lies in the hands of the telecom operators. So I really believe telecom industry is going to benefit and revolutionize how data is used to -- data monetization is used to move the network telecom operators from being pure connectivity and network providers to providing innovation in AI going forward. And here, with our 137 patents, the acquisition of a very early growth stage of AI/ML company in the U.S. and several telco use cases that we have brought to bear on our digital stack, I truly believe that Tecnotree is poised for growth in the AI industry. Thank you. Indiresh, go ahead.

Thank you. Thank you, Padma, for the wonderful presentation. So let me go to the numbers, and I'll try to be as contact as possible so that we leave sufficient time for the question and answers. Thank you. Can we go to the slides, please? So these are the numbers at the top level. I'll walk both Q4 and the year-on-year numbers. As you can see, the highlight was the free cash flow. In Q4 '24, we had EUR 400,000 free cash flow against negative of EUR 600,000 in the previous year. This is a change of about EUR 1 million in net. Similarly, for the whole year, as you can see, full year, we had a negative -- still a negative of EUR 1.8 million because we had a terrible Q1 of 2024, where we had more than EUR 4 million of negative cash flow. In spite of posting 3 consecutive positive free cash flow quarters, we still ended up the whole year at negative EUR 1.8 million. But previous year, it was minus EUR 9.7 million. So we made a substantial progress, but still we were on the negative side. In the constant currency, if you look at it, we had EUR 18.5 million in the Q4 and which is 17% lower in terms of previous years, which was at EUR 22.2 million. But our whole year, we were at EUR 81.4 million compared to EUR 78.4 million in the previous year. The -- if you really look at the real revenue, not in the constant currency, but the real revenue what we earn. In Q4, it was EUR 17.6 million against EUR 22.2 million in the last year, which is 21% down. And on a whole year as well, EUR 71.6 million against EUR 78.4 million. At this point, I want to just pause for a second and draw the attention, the difference between the constant currency and the real currency, which is nearly about EUR 10 billion. One of the reasons for us getting a real revenue of EUR 71 million was we lost about EUR 10 million in the exchanges. So if the currencies have remained as it was at the end of December 2023, my revenue would have been at EUR 81 million, which would have been about 4% higher than the previous years. The EBIT, the earnings before interest and taxes in Q4, it was EUR 7.4 million. In the previous year, it was EUR 7.9 million, a 7% reduction. But in the whole year as a whole, we did about EUR 26 million against EUR 23.8 million in the previous year, again, 9% higher. EBIT in real terms, real currency, it was minus EUR 10.9 million, EUR 10.9 million in this year against EUR 7.9 million in the previous year, a 38% jump, as Padma already explained about the cost actions what we took. That gave us a substantial benefit in Q4. But at the whole year, we were flat at EUR 23.8 million. Again, I want to draw one more attention. If we had currencies had remained same, I would have had another EUR 2.2 million more in EBIT as well. Can we move to the next slide? Now let's see what are the main highlights for the whole year in our view. I want to talk again about the free cash flow. We are able to achieve ARR, which a step which we took in the last year, which would give us a stability in our performance as we know that Tecnotree has a history of quarter-on-quarter variances both in its revenue and in the cash collections. That's been the trend and the nature of business in which we are in. So we were looking at how do we normalize it to the extent what we can. One way of doing it was moving into an ARR model. We started doing it from 2024 beginning onwards. So as you can see in '24, the constant currency rather in the ARR model, we are able to get a 10% higher revenue. Padma also spoke about CapEx to sales. We are bringing it down. While it looks just a EUR 1 million reduction from '23 to '24, I also want to draw to the attention that the plan of impairing these assets at a much faster rate. In 2023, we had a EUR 3.9 million as impairment on these assets, where we took it to EUR 6.1 million in 2024. The intention is to less capitalization and also try to impair it faster. The DSO days, this is -- I want to spend a little bit more time on this. It looks like 176 days and in 2023, 153, means a high of 15%. Is it really worrisome? Probably in the next slide, I'll walk through to see how it is. Order backlog, we think we had a reasonably good year. Unlike in the last year, just to cover the number, we had about EUR 78 million of new orders, about EUR 95 million was in 2023. There was a reduction in the order intake as well. But however, I still hold a healthy order backlog of about EUR 80 million, which is slightly more than about 1 year of my revenue. Can we go to the next slide? We talked about the DSO days. Looks very high, 173, very high. But let's look at the historical DSO days for the last 3 years, what I have provided. It goes up, comes down, again goes up, comes down highly seasonal. But what I want to draw the attention is out of this high receivable, nearly 40% of them are not in due, not in due meaning less than 30 days, which means that we had a lot of invoicing milestones, which were achieved in the Q4 of 2024, which I have billed, which has increased my receivable substantially, but 40% of them are not yet technically due or legally due. However, we still have few large outstandings, which are more than 1 year. They are from 3 or 4 large Middle East tier operators. All efforts are made. These are all the very long-term projects, which have been running for a couple of years. They are from a very large customer. So I do not see any risk in collection, but there have been a delay in collection. However, we have been making necessary provisions, which are as per the company policy, and which are as per the IFRS as well. The DSO days are higher, but the good thing or slightly positive thing is majority of them are nearly 40% of them are not yet due. Can we go to the next slide, please? This has a comparison for the last 3 years, '22, '23 and '24. As you can see that in real terms, my revenue came down from EUR 23 million to almost EUR 22 million level. I have already explained it. If we didn't have the exchange thing, we would have had EUR 81 million revenue. But also, I point out one thing. While we moved to an ARR, it also affected my revenue in real terms to some extent. We earlier probably in one of the slides which Padma walked through, it had the quarterly revenue what we achieved year-on-year and quarter-on-quarter. If you had observed this, I had a high peak and again, a loop towards quarter-on-quarter. But this year in '24, relatively quarter-on-quarter, we have been stable. So when we move into an ARR model, it does affect the actual revenue for a couple of quarters or even a couple of years and then it stabilizes. I believe 2024, we have achieved that stability even though we had a lower revenue, but it's more a stable revenue. Similarly, we had an EBIT of EUR 23.8 million, which was almost similar to the last year. And I want to draw attention of the other thing, the exchange losses, the real exchange losses when I revalue my assets and liabilities or when I bring the money in different currencies. Last year, if you had seen, we had about EUR 10 million of exchange losses, which we were able to contain it to about EUR 3.7 million in this year. That EUR 9.9 million was majorly due to the huge fall in naira, which we saw in 2023. And in 2024, also in the beginning, we had a higher foreign exchange risk. And hopefully, we believe that is more or less stable. We also had a onetime provision of EUR 7.3 million. Probably I will explain in the next slides the rationale behind it. And then the other thing about the taxes. As you can see, last year, we had EUR 2.8 million and current year, the taxes also increased to EUR 4.5 million. One of the reasons Tecnotree operates in multi-geographies, multi-tax zones, multi-tax jurisdictions. And there are a lot of efficiencies we can still improve upon, which we are working on, and I hope to bring down the taxes and the exchange losses on retail at a better level in the coming years. The net income because we made that onetime provision of EUR 7.3 million, it came down to EUR 8.3 million. And if that had not been there, we would have had a fantastic EBIT in the current year. The cash collection, again, cyclical. We collect some of them in certain quarters and certain quarters, it is done. We collected about EUR 51 million in the last year. I already worked out. As explained, orders received about EUR 71 million compared to EUR 95 million in the previous year. Because of that, the order backlog is about EUR 80 million, which is almost same as last year. Can we move to the next slide, please? There've been -- I wanted to share a little bit more about the onetime large provisions what we made of EUR 7.3 million. As all of us know, Tecnotree did acquire a Middle Eastern customer through an acquisition the [indiscernible] Tecnomen did with Lifetree India Company in 2008, and this customer came along with that acquisition. We have been providing services to this customer until mid-2023. And after that, no revenue we recognized from this customer. And due to geopolitical risks, the war threats, the threats of financial sanctions and Tecnotree's mature market entry plan, we decided to exit at this customer in 2023 Q2. At that time, the total receivable from this customer was EUR 15.6 million, and that was reduced to EUR 10.6 million by early 2024 or beginning of 2024. We have been constantly discussing with the customer, negotiating with him to collect the entire money. We always believe that we need to collect that, and we did a lot of negotiation with the customer to collect the entire EUR 10.6 million. However, the customer has now come to make a settlement at EUR 3.3 million, paying the entire EUR 3.3 million and settled at EUR 10.6 million. While we still make an effort to collect this as a prudent and a conservative accounting, we have decided to make a provision for the EUR 7.3 million. And this EUR 7.3 million is disclosed as a separate line item below the EBIT as per the IFRS 5 guidance, which talks about the discontinued business. So this is the rationale behind EUR 7.3 million. And we have not given up. We are trying to collect it. Padma, we did have a history of this in some other customer. Do you want to talk about that?

I don't know if some people who have been with Tecnotree as investors for a long time would remember our entry into the LAP GreenN market. We had 3 operators to whom LAP GreenN was the group owner. We had a USD 10 million receivable, which took us 4 years to collect because of the war and the political -- geopolitical situation in Libya and so on and so forth. But we still collected about USD 6 million to USD 7 million of the USD 10 million after 4 years. So Tecnotree never gives up in pursuing to make its collection happen. But we have to ensure we have taken abundant caution and put the situation in the right perspective from financial terms. And I think taking the provision, while it is difficult to swallow, I think impacted our EBIT, it impacted our net income, it was the right thing to do for our investors.

So at this point, we wanted to be very prudent and conservative like accounting that always allows to be. So that is how I have taken a provision of [ EUR 7.3 million ], and we haven't written it off yet because we haven't concluded with them. We are still asking for more. But what we know for sure we are going to get rest of the money I've already provided for in this. And I do not anticipate any further provision or write-off against this particular receivable any 1/3. Can we move to the next slide, Thomas? This is about the balance sheet, the assets and liabilities, what we have. We have been investing in the own developments. As you can see, there is an increase in the investments. But again, we are taking a faster impairment, and we ensure that there is a proper impairment test done on all these intangible assets. We do have a process wherein every quarterly, the intangibles are tested very severely, and then necessary impairments are taken for that. We did have a small, deferred tax assets to be received in one of the geographies. We realized that may not be any more available to us. We made a complete write-off of that deferred tax asset. And similarly, we did receive the balance amount in 2024, whatever was due on the completely -- compulsorily convertible debentures. The full amount has been paid up now. And we also paid out -- there are certain interest-bearing liabilities that came to us along with the acquisition of CognitiveScale in 2022. We paid out the dues which were run on that loan as well. So this is where we stand. The shareholders' equity stands at EUR 92.6 million at the end of the year. That's my balance sheet. Can we go to the next slide? One thing, Thomas, before we go to the question and answer, while Padma spoke about the guidance, I want to reiterate again that our guidance for 2025 are in constant currency as far as the revenue and EBIT margins are concerned. But on the scale, the cash flow, free cash flow, it is on the real currency, not on the constant currency, which is -- which I think is something we are proud to plan and achieve. Yes, Padma, you have anything before...

No, I think that was perfect. Thank you, Indiresh.

So, Thomas?

Wow, thank you so much, Padma and Indiresh, and thank you, all of you online. You 33 attendees at the moment. You guys have been very active sending us your questions. We appreciate your time and effort to be here with us this morning. If it's okay with you, Padma and Indiresh, I'd like to start the question and answer?

Please.

And this session will be done in English. There is one question in Finnish, so I will provide it in Finnish, but also get a translation in English since this is a recorded event. So please explain the onetime write-off of EUR 2.9 million in Q2 and Q4, the onetime provision that made a total for EUR 7.3 million in the full year. Please also communicate the path aimed at reducing future receivables.

Yes. I think probably I can take that, Padma, because that's again spoke about the provision. I believe I have shared the enough information on that. Yes, this was a provision. What we did was we took it in 2 tranches. We provided about EUR 2.1 million against this in Q3 and the rest of them in Q4. Whatever was the impairment we had taken in Q3, when we retested it, we realized that the impairment was no longer required. So we wrote it back in the some substances in net, we wrote off this EUR 7.3 million or we provided for in EUR 7.3 million in the whole listing. I think I explained why this customer came to Tecnotree's [ Lap ], how we did provide them a service over a period of time, what are the issues we had, why we had to exit that particular customer, and what was the amount at the time of exit and what is the current receivable and what the customer is paying us right away and the rest of the amount we have made a provision. I think I have provided the necessary explanation. If there are any follow-up questions, I'll be happy to take that. And I do not anticipate any further provision or write-off on this particular receivable. And one more point I want to highlight, any money that we have received against this receivable was not taken as a revenue, but as against the receivable, which we already had accounted for. And yes, I hope that sufficiently answers. Okay.

We'll try to keep all the questions and answers within 2 or 3 minutes just to make sure that we will go through all of these questions in time. Your cash flow guidance for the upcoming year seems significantly more conservative than expected, particularly with the forecasted reduction in investments. Could you explain why you are adopting such a cautious approach, especially considering the positive cash flow trends in the previous reports?

Maybe I'll answer and then you can add to it, Indiresh.

Yes, please.

First of all, Tecnotree since the time we started giving guidance during my time starting, I think, 2021 or so, we have met our guidances. So we are very, very particular that we set the right targets. And as a management team, we strive to achieve those targets. The cash flow guidance given, as Indiresh clearly pointed out, is greater than EUR 4 million in real currency terms. Given the fact that we just came out of 6 consecutive years of negative free cash flow, and we took huge currency exchange losses, I think you said EUR 10 million in '23 and another EUR 4.6 million in Q1 of this year. And the naira, while right now seems to be doing in a stable manner, there is no guarantee how these fluctuations may come up during the course of 2025. And having given a guidance of greater than EUR 4 million in real currency terms is a significant milestone for us to achieve, knowing fully well that we serve globally very difficult markets. It's our niche capability to serve African markets and Latin American markets and certain difficult geographies that we continue to serve as a telecom service provider. So having put ourselves in that position, I felt it was extremely prudent to make a guidance that we can achieve or overachieve. It's still very early days in 2025. And given the current slow growth that we are projecting on revenue, we will be very cautious. And if we see good improvement and good uptake and good progress in terms of our financial management and cash collection, there's no harm in improving the guidance at an appropriate time.

Yes, Padma. Just to add to that, as Padma already mentioned, in the last 3 years, there was only 1 quarter, Q3 of 2022 when we had a positive cash flow of EUR 5 million. And what happened in the next quarter was there was a negative cash flow of EUR 6 million, which meant that in the last 3, 4 years, we never had any 2 consecutive quarters of free cash flow in this company. It's highly cyclical. We have overcome that to some extent by pushing some of the contracts into an ARR model. However, even in 2024, Q1 was a negative cash flow. We were able to achieve free cash flow positive in Q2, Q3 and Q4, probably first time ever, 3 consecutive quarters of having a free cash flow. We are sure that we will achieve that as well. So that is the reason we have given a very conservative or a modest target of above EUR 4 million. And as Padma said, it is the beginning of the year. As the years weighs on, we will revise as and when required.

And it takes extreme agility in the way we do our R&D spend and in the way we manage our marginal cost of investment on our product stack to achieve this free cash flow. We need a lot of agility, a lot of ability to predict where the market is moving and what operational measures that we need to take in order to achieve it. So we are capable of doing it. We have proven we can do it, and we'll continue to improve our efforts towards meeting the guidance.

Thank you for those answers. And the next question, I would ask that your answers be no more than 2 minutes just so that we have time to go through all the investor questions. There have been significant growth in receivables even after a EUR 7.3 million write-down on certain accounts. Can you clarify how this impacts cash flow and the company's liquidity going forward? And what steps are being proactively taken to address this issue? I believe this theme has been rising up a few times on the call, but please go ahead.

Yes, I can talk about the financial impact of that. Yes, there's an increase in our receivables. But I think I showed in the chart, 40% of my receivables are not yet due. That gives me a little comfort about the quality of the receivables. Yes, there are certain long overdue receivables. I'm sure that as the period goes when we complete those projects, we should be able to collect them back. And if you just ask me, how was it compared to the last year? In 2023, the same number, what is now 40% was less than 30% in 2023. So to that extent, while the number of -- or the value of the AR has gone up, but the quality of AR has also improved by 1/3. So that is where I'm looking at that more a little bit positively. And we are also, as Padma initiated many actions, Padma, for example, no payment, all that.

I also want to say that if you looked at the revenue growth, the reason why Q4 2024 revenue was lower than Q4 of 2023, we had a number of licenses that we booked in 2023. In 2024, you saw that the license revenue had come down, but the project delivery business and the ARR business grew. And then once we deliver the projects and we delivered something like 20 go-lives or 20 or 22 go-lives over the course of the year, we started invoicing them. So a lot of invoices were generated during Q4 and later part of Q3 of 2024, which become due. And therefore, the receivable is still fairly young in terms of its aging. And of course, we will continue Think Cash Do Cash operational models. We will continue the No Payment, No Work models. We will continue to issue dunning notices. We will continue to negotiate with our high relationship, high-touch customers for better payment terms as we deliver better quality of service. And all of these dimensions are still operational.

Thank you. There have been concerns raised in the forum regarding the management's ability to meet previous growth promises and steps taken to rebuild investor confidence.

I think as I earlier stated, I'll just mention it and maybe you can add a little bit, Indiresh, is that we set guidances, and we have met the guidances consecutively for the last 3 to 4 years, and we plan to do so in 2025 and beyond. We have come out -- we have taken this company to one of, I think, the only company in Finland that has come out strong out of debt restructuring and created a growing concern with a revenue growth trajectory that we have been able to keep ahead of the market. So I'm confident that we are taking a lot of strategic steps towards improving operational excellence, increasing the revenue potential within the company and making very strategic choices in terms of overall strategy, whether that's AI/ML, whether that is going towards adjacent markets to get growth on the digital stack or whether it is adding the wallet to the digital stack to improve the fintech and the financial equity in some of the developing markets that we are serving. We have taken -- made some intelligent choices. And if you look at our entry into North America, the reason why we were able to enter and break into a Tier 1 telco was the investments we had made in terms of CapEx in the prepaid markets of Africa. And today, as the mature markets turn to prepaid and subscription-based economies, the journeys, the maturity of the stack, the capabilities that are inbuilt in the stack, they're very, very attractive to these customers. They want these features. We have these features. They have grown and matured in our stack, and they have been extremely well received in these markets. So I believe that we have taken some calculated risks, and the rewards have definitely been met by us. So I'm positive about how AI/ML strategy will unfold in 2025 for us.

Thank you. Thank you, Padma. Given that operating profit has been strong despite limited revenue growth, what is your strategy for balancing profitability with the ongoing investments needed for the company growth? How will you ensure that the current investment strategy translates into sustainable long-term growth?

Shall I...

Yes, please.

Okay. So I think as we move away from currency risk zones to more mature markets that provide revenue in dollar denominations, we need to ensure that our strategy to enter these markets and scale in these mature markets is correct. This is why we took an SI-led approach to get the scalability in growth and the penetration into the markets. We will continue to expand that partnership and that approach into these markets. It's also a more economical model of entering markets where the relationship today already exists with some of these SIs. We also look for other opportunities. I already talked about unlocking value. Telecom operators have a huge opportunity in 2025 and beyond to provide data monetization capability, mainly because of the data accessibility that they have on the network to take the data and to apply these generative AI models, train the models and provide very meaningful insights and predictions of how this data can be utilized in multiple industries, across multiple industries and adjacent markets. And I believe our investments in AI/ML will fructify and support these operators to unlock the value that AI/ML is going to bring into the future. And we are looking forward and extremely excited to continue to grow our business in these areas.

Thank you, Padma. And let's keep the last 4 questions brief. Shareholders have expressed concerns about the modest dividend policy, especially in light of positive operating profit. Can you provide more clarity on the rationale behind maintaining such a conservative dividend payout? And if there are any plans to adjustments in the future?

Indiresh?

Yes. So a trivial question, Thomas. In Tecnotree, when did we last pay the dividend before last year. Let me tell you, it was in 2008. That's about 17 years back was the last dividend Tecnotree has paid. We are not a dividend-paying company. So last year was the first year when as a company, the company took a decision to start paying dividend, even though it was a very modest, very small, but we wanted to start. At that point of time, we started -- we made a dividend policy, where we said that the dividend -- our intention is to pay a consistent and a growing dividend. That's the policy what we have. And we want to ensure that the investors get benefit from the growth. The intention is that. And I think, Padma, you want to add anything? That's I think -- yes. So we will...

To grow and improve it over time, but we have to start becoming consistent.

The next one was in Finnish. I know that we've answered it, but I just want to read it out. [Foreign Language] Please forgive my translation. The sale of the Iranian business asset left a significant amount of receivables still outstanding. Can you please provide an update on the status of these receivables and explain how they're being managed, especially considering previous communication that the full amount would be recovered in 2024? You briefly mentioned Indiresh about this already, but if you could summarize in less than 30 seconds.

No problem. I'll take it. I think, yes, as I said that I had answered it earlier, but I'm happy to answer again. At the beginning of 2024, the total receivable from this Iranian business or the discontinued business, what we discontinued in 2023 June was -- at the beginning of the year was EUR 10.6 million. And against this EUR 10.6 million, we are getting EUR 3.3 million right away. We have kept that. And the rest of the amount we are [Technical Difficulty]. We have reiterated the reason for making a provision is that is not the end of settlement. We will still go, pursue and try to get more. But whatever we are getting is about EUR 3.3 million and the rest of the amount have already made a provision. I hope that clarifies again.

Thank you, Indiresh. Last 2 questions with 5 minutes remaining. Could you elaborate on why collaboration with system integrators are beneficial for Tecnotree?

I mean, very simply put, SIs are really systems integrators. We develop the stack based on very standard APIs, so that the integration aspect, if you take a telecom platform, it has several northbound and southbound integrations. And normally, we have to scale our resources to -- when we go into an implementation cycle of our product to scale our resources to make these implementations happen, which means they have to hire local resources in different geographies or apply global resources to these geographies and make these implementations a success. When we partner with an SI, we reduce that risk, and that investment that we require, which means we can go faster. We have trained these SIs to implement our products into the environment of our customers. They have the relationship. We move on to the next opportunity faster. So we get more coverage across the market and faster implementations. And they bring us opportunities, we bring them opportunities. It's a symbiotic relationship.

Thank you, Padma. Question, you said in Q4, increased productivity from AI/ML has enabled us to consistently execute 5 to 7 digital transformations per quarter, reinforcing our ability to scale revenue with efficiency. So question, how much revenue does one change project generate on average?

So on the financial terms, if I want to say, our EBIT margin is 33%. That is all I can say that that's the overall. While I cannot segregate and give a profitability project-wise or customer-wise, our EBIT is about 33%. And we have given a guidance that next year for 2025, this EBIT margin will improve by 2%. So I hope to that extent, it answers the question. Padma, do you want to add anything on the...

Perfect answer. Thank you.

And last question with under a minute to go. If -- in EBIT, we saw a great improvement. Could you go through what drove this significant improvement?

Why don't you...

Sure. As I said that why did our EBIT increase. One of the biggest thing is cost savings. So initially, we had budgeted our plan. When we announced in Q2, we did announce a cost-cutting measures to the market. There, we had anticipated that about EUR 4.5 million is what I'm going to save in rest of 2024. However, we were able to achieve more savings up to EUR 6.9 million. So that is the biggest driver for it. And we are also able to manage our FX losses better. It has a favorable FX losses. And also, we have been pushing the customers to pay on time, improving our cash collections and more than anything, also moving away from the frontier markets. In one of the slides, Padma did mention, today, my exposure to the markets, the frontier markets is less than 20%.

Yes.

So that is also driving an improvement in my profitability and improvement in collections.

Well, thank you so much for all your questions in the chat. I know a lot of you guys were dumping also questions into the chat. Hopefully, we were able to cover most of them in this Q&A section. Thank you so much for all your interest in Tecnotree. Please do come next week if you are in Barcelona to visit us at the Mobile World Congress. Thank you, Padma. Thank you, Indiresh, for your time and being here. And thank you to all the investors, media and shareholders who are on the call today. With that, I would like to end today's earnings call. Thank you so much.

Thank you.