Telelink Business Services Group AD (TBS) Earnings Call Transcript & Summary

Hello, everyone, and welcome to our last financial overview for the year. My name is Faris Abbas, and I will be moderating the session once more. Sitting here with me is Mr. Ivan Zhitiyanov. And today, he will be presenting you with the group's consolidated results for the first 9 months of 2024 as well as estimates for the full year. In addition, we will shed some light on the business plan for 2025 and the long-term financial projections until 2029. As usual, after the presentation, we will hold a short Q&A session, which you can access from the top up right part of your screen. [Operator Instructions]. Without further delay, I give the floor to Mr. Ivan Zhitiyanov. Thank you for being here again.

Thanks, Faris, and hello, everybody, and thanks for being with us. So yes, as far as outlined the agenda, I will start with the first 9 months and respectively, the third quarter, which is already finalized from accounting perspective and everything. I will try to go through the 9 months a little bit faster without going into much details, because we are much into -- already into December, so more or less, we have a better idea of what's going to happen in the whole year. So yes, I'm going to put a little bit more emphasis on the whole year, then continue with 2025 on the long-term prognosis that we have until 2029. So yes, going further, we have included the standard set of slides that we're providing. Starting with comparing the quarter with the third quarter with the last 4 years. So on that slide, you have the third quarters for the last 5 years, starting from 2020 to 2024. So Q3 of 2024, we did EUR 25.4 million in terms of revenue with a 22% gross profit margin. We -- so comparing that to the last year quarter, it's comparable. So last year, we made EUR 26 million with 23% gross profit. Comparing to the years before, it's almost twice what we were doing in 2022 -- 2020 sorry. So basically, I will again make the note that unfortunately, still not a big percentage of our business is recurring. So like around 70% of our business -- 65% to 70% of our business comes from a project-based business. So unfortunately, that -- looking only on a specific quarter comparing to other quarters and things like that, even looking into a 9 months or half a year, it's not representatory for the whole year. Anyhow, going further, this is actually the fourth consecutive quarter prior to quarter 3. So we already spoke about quarter 3, EUR 25.5 -- EUR 25 million with [5.6% of gross profit to 0.6%] of EBITDA in terms of absolute numbers. If we compare it to Q2, which for us the Q2 was not our strongest quarter to say at least, Q2, we had 16%. So we are growing quite a lot from a Q2 perspective with a negative net profit and around 0.0 of EBITDA. So if we look at that from a yearly perspective quarters in the year, this is the best quarter that we have in that particular year. So going further to something that's a little bit more representative, this is the trailing 12 months. So if we compare the trailing 12 months data for as of the ninth month of September 2024, and compare that to September 2023, we can see a 24% increase in our revenue and 23% increase in the gross profit, 1% increase in the EBITDA and the net profit is decreasing with 18%. We're going to speak a little bit more about, I think that it is very relevant on the next slide, but what's happening -- this is the P&L for the first 9 months. I'm going to explain that and go back to what I was starting to tell you. So yes, this is the 9 months of 2022, '23 and respectfully '24. So on a 9-month basis, we are growing at 10% from the last year. But the EBITDA and the net profit are actually slowing the growth and actually decreasing, and this is due to a lot of reasons. And one of the reason is that we are expecting to have a very strong Q4. And obviously, in order for us to have a good Q4, you need to work in the first half of the -- in the first 9 months of the year and you're accounting all the expenses for these presales, marketing, sales activities you're accounting in the first 9 months. So basically, to give you a rough idea, we're expecting around EUR 49 million to EUR 50 million to invoice in the last quarter of the year. So yes, we had an extremely busy last quarter, you're going to see the data and the projections for the last -- for the whole year. But obviously, this is part of the reason that we have more sales and presales expenses in the first months that actually not corresponding to the profit and the percentages are going down. The second thing is the acquisition of 7IT in Croatia. So the 7IT of Croatia, we are still calibrating the reporting structure and how they are actually moving the cost for -- the indirect cost for sales, so that those are the things that are going into the project as an expense, not going to sales, marketing or G&A. And we still have a relatively bigger like 3% to 4% -- percentage points, bigger SG&A expenses in 7IT that we have in Bulgaria. And we believe and -- but it's a question of time to fix that, to call it like that, to calibrate it a little bit better. Actually, there are specifically sales and marketing expenses that are going -- that should go into the projects and actually lower a little bit the gross profit, but decreased the expenditure in sales and marketing and G&A. And the third thing is the investments that we are making, and we're going to talk a little bit more about the investments. But again, I really strongly believe that it's better to talk for our expectations for full year. Having said that, the Q4 of 2024 is expected to be our strongest quarter all time and the strongest quarter for 2024. And for a lot of the Q4 will actually define 2024 as a financial year for us. Okay. Going further, this is just a P&L for the first 9 months, a little bit more detail, so we're increasing the revenue comparing to last year. We're increasing the gross profit. We're increasing 43%. We're increasing the sales, marketing, general and administrative expenses. Yes, I told you why that's happening, the bigger revenue and the bigger gross profit are compensating partially that. And on EBITDA level, we are actually just 2% below what we were making on EBITDA level last year. Yes, we're not going into details further in the P&L, we're going to have the presentation. If you're looking at the personnel for the first 9 months, so we actually grew from 343 employees to around 500 employees -- 495 employees, 117 employees actually come from the 7IT acquisition that we made, but the other 30, how many are they 45, 35 employees are coming from organic growth, predominantly in Bulgaria, but yes, actually, we are let's call, optimizing our expenses in some of the countries. We're going to speak about that in a while, and we are hiring more people in Bulgaria, which are in delivery and operations. But anyhow, we have increased the personnel by 44%. So these are the investments for the 9 months. And again, you're going to have that slide for reference. I'm going to move a little bit faster here and go to the full year perspective, not to lose time on the 9 months. Yes, this is -- this slide is showing the revenue by invoicing region. So yes, obviously, the biggest growth is in Croatia, where we are already including the M&A part, and we are showing it in our numbers, and that's why we're growing with 200% in the first 9 months. This is by end client. We are growing in public sector, we're growing in the enterprise. The biggest growth is in enterprise sector by 36%. Other telecom is more or less stagnating. You're going to see that on a yearly basis, it's a little bit decreasing, which is something again that we are expecting product family, not something so important. This is from a cash flow perspective. So yes, I think that we've been talking about that. But -- so last year, we were in negative cash flow position, minus EUR [4.2] million. This year, we are pretty much the same of around EUR 4 million. Last year, we had a bigger need for financing different projects and different clients in that respect. So that's why these blue parts, minus 6.6 is so big. This year, we were able actually to collect everything that we needed to collect, but we we've made a significant investment in 7IT for acquiring that kind of business, and we are staying in the same position more or less. On the net cash debt position, we are in a negative position, which is normal, more or less to have -- I mean, Obviously, we are increasing the net debt position, and this is due to the long-term loans that we have for acquiring 7IT. Rather than that, you can see that there is seasonality in our business. So on the September basis, we are expecting to be in a net debt position more or less in the end of the year, we are expecting in most of the cases, and we believe that this year it's going to be the same. We are expecting a net cash -- positive net cash position. So there is a seasonality in our business. And yes, looking from a September perspective, it is more or less what's expected, but a little bit bigger because of that. long-term loans, long-term investment that we're making into 7IT. So yes, now talking about the full year, which, again, I'm going to be diving a little bit more rather in the full year rather than for the first 9 months. So looking at the full year, we are expecting to have around EUR 112 million as a revenue perspective. We are still fighting. So in order to understand when you're doing a project-based business, so you have -- partially you have something that you are reselling hardware. You have software that you're selling, you have subscription that you're selling, part of those things obviously depends on the vendor, especially when you have a hardware, which for us is I cannot tell it on the top of my head, but it's above 35% of our revenue comes from hardware resale. Then the subscription and the software resale business is depending on the services business. So it depends on where -- when you invoice the subscription and they start actually those subscriptions to be invoiced, no matter if it's a monthly invoice or once per year annual invoice, it depends on when you actually deliver that all the services and the clients accept and said, "Okay, I'm happy with what you've done with the hardware, software, and I'm willing to start paying for that thing. So this is the project-based business. And we are still fighting -- even though it's a 17th of December, we're still fighting to still invoice some things and maybe go a little bit -- so what I'm trying to say is there is a plus/minus here on the revenue side, which could change till the end of the year. So it's a really busy month for us December. It's a really busy month. So on the gross -- and yes, our initial projection was EUR 125 million. We have -- I'm talking on top of my mind, but we have updated that projection to EUR 116, EUR 117 million, somewhere midyear. And now we are projecting a little bit less than what we were projecting. I'm going to be talking a little bit more why that's happening. So we are projecting to EUR 120 million of revenue. On the gross profit side, we were projecting 20% of gross profit margin. We were able -- or we should be able on a preliminary data to have 22.3%. On the EBITDA and net profit level, we are expecting to have 9.1% and 5.1%. So we are moving with those 2% better gross profit actually transferring into the EBITDA profit margin and to net profit margin, which actually is with this EUR 13 million or so less revenue. So -- and that's around 10%, 9% out of our -- less than what we have been budgeting, but we are able to achieve pretty much the same gross profit level, so EUR 25 million, we are projecting EUR 25.4 million. And on an EBITDA level, we believe that we'll be able to achieve EUR 10.2 million which is EUR 1.4 million better than what we were -- what we were budgeting and 30% more than what we have done in 2023. So yes, on the net profit side, we are expecting again to have EUR 5.8 million net profit, which is 90% better than that we were expecting in 2023. So yes, 90% bigger revenue, 33% bigger gross profit, and I share your other numbers. So this is what we are expecting. On the revenue side, again, we are pushing to -- we are fighting for that revenue. We still -- I don't know how many we need to invoice to the end of the year, maybe around EUR 10 million or something like that. So the gap is not that big, and we're quite confident that we're going to achieve it. We're going to be actually fighting for a little bit more half to EUR 1.5 million. But again, it depends on deliveries. And are we going to be able to finish the work? When we go into the EBITDA net profit, although we're quite confident there may be a slight bigger changes when we have the full quarter for already completed from accounting perspective and things like that, but more or less, we're very accurate in our projections, especially in December. So we believe that we'll be able to achieve that with a very high probability. Our last update on the EBITDA, whatever it was, maybe August, I don't know where is July, I really don't remember. But yes, we were expecting to make on EBITDA level EUR 10.3-ish million. Currently, we are looking to EUR 10.2 million on EBITDA level. So more or less on EBITDA and profitability side to call it like that, it's what we have projected last time. And that's why we didn't make any new updates on our outlook because more or less, we are fighting for the target that we had -- the previous public target that we had. Okay. Going further, So if you remember -- so those 2 first columns, set of columns, cluster of columns, it's more or less -- we already discussed that. Sales and marketing part, we were growing 43%, 44% on a 9-month basis. On a yearly basis, we are compensating a little bit that growth. So we're going to a 39% growth on a consolidated base. And you can see that we have around 16% of our revenue actually is going into the as SG&A. You're going to see we have a specific slide how we perceive that to go further into the years, which obviously is -- we are targeting a value above 15%, close to 14% in the years to come, which on the revenue that we are expecting and we are currently making, it's a lot of money on the sales marketing G&A part. Yes, the other things are more or less self-explanatory, and I'm not going to spend any time on that. So we we're talking about investments and maybe not the right word, but anyhow, is how we started this to how we're continuing to -- we are defining our investments in 2 directions. The first is for new business and new markets and the second part is for a functional investments into our functional capabilities and operational capabilities that we're making. So on the business market, this value that you're seeing here are net cost of business. So is actually, if, for example, Germany and Germany is generating around EUR 1.5 million, if I'm not a little bit less of a revenue with a corresponding gross profit. So -- and actually, this number is accounting the gross profit and just showing the net profit that we are making for that market, not from -- not the investment, for example, from sales and marketing or G&A only, but the net effect of that investment. Anyhow. So the first part is I'm going to go into details -- a little bit details here. So I'm looking first on the left side. So this is new business in markets. So West, we were expecting to actually invest around EUR 1 million in the West this year. We had invested EUR 0.6 million. So we have decreased that projection for investment. And actually, this is pretty much what we have been spending, what we've spent last year when it comes to this West market. So the West market where that comes from. So first, we have 3 or 4 months we have been talking about 2024. In 2023, we hired a guy in U.S. and a guy in Germany. They hired a team. They cost us a lot of money, definitely disproportional to what we gained for those months. We decided to depart in some point of time with them, which was a mutual agreement with them and we decided to start from scratch more or less. So part of that investment is still those 4, 5 months, 3 to 5 months in the beginning of the year, that they don't have a revenue and gross profit that is backing them up. The other investments is we have hired a sales guy in U.K., somewhere in September time frame -- August, September time frame. So yes, we have -- we still don't have a close opportunity. We have -- let's say that we have a relatively good pipeline for around EUR 0.5 million, mainly small and midsized clients in the U.K. We're starting to look into the U.K. into a little bit more tendering, because there are a lot of standards that are happening in the United Kingdom as a whole, including yes and Ireland -- both Ireland. And actually, it's -- yes, we have been bidding -- we start bidding for those projects as well, but I'll talk a little bit more about that in a while. In Germany, we were unable actually to hire a sales guy. We have been pursuing more than 4 or 5 sales guys. We actually strike a deal and a sales guy will start from the beginning of January. So we feel comfortable with that. Of course, we are delaying the whole process, which you're going to see into the 5-year prognosis that we are a little bit postponing the income that's going to come in with from the West in order to make it doable, realistic. We have -- we currently have 3 or 4 people in Germany, with an extended team in Croatia of around another 3 people. So they're doing a low-code, no-code development. So around 7 people are doing this low-code, no-code development. On a yearly basis, they're generating around EUR 700,000 in revenue, but the net loss this year of around EUR 100,000, which actually is included in that investment. So it's an interesting business, this low-code, no-code development. We have a huge partnership with specific vendor called [indiscernible] systems. And we're actually growing with that vendor who is a challenger on the West market. So there are a lot of prospects. Plus, once we enter those clients, we are trying to do an upsell and cross-sell into a different area. So it's been an interesting business, but this year is generating a negative profit. We have started working in the Nordics. So we actually started working in the Northeast, mainly Sweden with a subcontractor, which is more or less a small fee -- retention fee and the biggest success fee, which is a model that we are looking after, definitely for the West market. So yes, we have already some pipeline. We start working before 3 months. It hasn't generated a lot of net profit investments but still. And we have started in November an endeavor with -- in U.S. with a specific U.S., let's call it, Sales-as-a-Service or something like that. So basically, we entered an agreement with a company that is doing that for worldwide. So we're going to see what we are testing the model, but we -- at the point of time, we decided that we want to understand a little bit more about the U.S. market before making another investments. And it's not only about the investment, it's about the time different. It's about trouble distance and so on and so forth. So we want to have a little bit more data. Anyhow, going to the East, the main net profit loss for the is coming currently from Romania, we have been speaking. We are -- we were able actually to close the acquisition in Romania that we -- that I was sharing the last time. And most probably this -- the Romanian market for us is at least for the time being a closed page to call it like that. I've been sharing with you that if we don't find a proper market for an M&A in Romania, we're not going to continue spending money in Romania, and that's actually what's going to happen in 2025, we're going to decrease that spending to the minimum. We have some obligations in some contracts that we have, but we will try to finish all the obligations that we haven't and put the entity in the dormant state. And we'll continue looking for a potential M&A target in Romania. But honestly speaking, we have done a lot in the past 2 years. I personally have seen more than 15 companies, more or less -- and obviously it's -- obviously, it's very hard to -- at least for me and for us to find a proper target. Anyhow, this investment in the West is going to shrink in 2025 and going further. Centers of excellence, this is actually our way the people -- those of you who are with us in the prior sessions, you know that we're investing currently in 3 centers of excellences and this is public cloud and productivity, which is more or less important for our West expansion where the public cloud and productivity are de facto standard. And actually, it's very important for us to have more knowledge and product and solution there, because this way we can work remote. So when everything is on the public cloud is easier. Anyhow. The second data center is for cybersecurity and the third data center is for data AI and automation. Cybersecurity is already running for a year, public cloud and productivity again for a year. The data and AI part is running for the past 4 months, 5 months or something like that, maybe a little more maybe 6 months. So yes, we -- I believe that it's a crucial importance those center of excellences. So this year 2024, we were in more or less a little bit more chaotic side, a little bit more development, a little bit more research, a little bit more looking how to structure our internal organization to support the center of excellence, which is quite new to the organization itself, finding the right people, building the right people and so on and so forth. But I believe that going '25 and further, this will be, at least from my point of view, this is if I have three priorities, this is in the top 3 priorities, these center of excellences to be extremely effective and to create a differentiating -- differentiation for us as a company that's extremely important when we do the M&A strategy going further. So yes, that's more or less what's happening in the center of excellence. We have spent much less than we have been projected. But actually, honestly speaking, we have produced much less than I was expecting. So again, it's more like we were in kind of an infant state, and we're going into our toddler state in 2025. M&A this is actually -- so these are the M&A activities that we saw. This is actually the money that we spent prior to acquiring 7IT, plus we are currently in advanced phases of negotiations as well, but due diligent with one particular company in Slovenia. I'm going to share maybe a little bit more about that if you're interested. But actually, we are paying the confirmatory due diligence this year. So that's why the M&A part is growing. So this is the new business and market investments that we're making, going on the functional part TBS Academy. You know about it. We are making a little change in 2025, how we perceive, but when I speak about 2025, I'm going to explain. Digital transformation, again, maybe I'm going to speak with -- when I speak before 2025. I'm going to explain you what's in our pipeline, what have done and GRC, the governance risk compliance, and actually, they are doing the old ESG and TAG initiatives. So those are included in there. The ESG part is getting more and more important for us, especially going into -- and going into the West, working with bidding for West tenders and the ESG part is really important from an economical perspective and from just people and responsibility perspective. Okay. To change the scene a little bit. So we're growing -- this is the revenue by region. We're growing 24% in Bulgaria, which was something that we were expecting. So we are EUR 3 million less than what we were expecting to grow in Bulgaria. We get a little bit better gross profit margin. We were expecting 23%. We're getting 24%. This committal business pool is actually the business pool, which is focused on Serbia and one particular specific telecom group of companies in our region. We've been talking about that, but we are expecting. And it was a gradual decrease in the revenue that we are making with that sector, which, obviously, we were able to cope with the different clients in different verticals. But anyhow, we started 3 years ago, we were 4 years ago, maybe we were generating EUR 26 million, EUR 27 million from that particular group with around 9% to 10% of the gross profit margin. This year, we are generating EUR 13.3 million, but with a much bigger so 17% by the margin on a gross profit level. So yes, it's not only with that particular telecom group, but predominantly, we have some commercial clients over there and things like that. So yes, we are making a little bit better profitability there. Croatia part. So the Croatia part is obviously growing 53% year-over-year. So last year, we were able to make EUR 8.9 million revenue in Croatia, but with a very low margin. So gross profit margin of around 5%. This year, with the acquisition of 7IT, we are generating EUR 13.6 million, so around -- both with a 23% gross profit margin, so -- but much better profitability. So how it happened, we are consolidating the 7IT from first of April onwards. So 9 months of consolidation revenue over there, which is accounting for around EUR 10 point something, EUR 10.2 billion, EUR 10.5 million of revenue. And actually, the rest, EUR 3 million more or less is coming from our organically based business that we used to have. So from a revenue perspective, we've lost EUR 6 million or EUR 7 million that are low margin business in Croatia. And added only three out of nine. We added only 3. So 30% of that business, we added towards the 7IT, but with a much better gross profit margin. Southwest Balkans, so this actually when we -- after our decision to sell Albania more or less, this only North Macedonia, which is obviously generating kind of what it was generating the last year. We're still expecting to see what will happen in Northern Slovenia and how we will be able to proceed with in that country? And is there going to be a potential for growth and what we can do over there and things like that. But anyhow, it's still not decided for us and staying as is. Romania, as I told you, yes, we are generating a negative gross profit in Romania. But yes, we managed to generate some revenue, but more or less, again, it's not something that you're going to see next year, we're not going to invest any more in Romania. Germany, U.S., U.K., EUR 1.5 million with around 20% of gross profit margin. So yes, it's the business that we're invoicing in those countries. It is growing slower than we were expecting. So we basically, those are the numbers. The telecom business decreasing with around 14% year-over-year, but something that we are expecting. Public sector business growing 6%. As you can see, we were imagining projecting a much bigger growth, but currently, our public business is generating around EUR 60 million or around 52% of our revenue, 60% of our revenues coming from the telecom and the biggest growth this year is in the enterprise sector where we are generating EUR 35 million with around 32% of the whole revenue of the company. So yes, this is the by client type. By product family perspective, obviously, we're growing the IT infrastructure, which is our main kind of a business, we have growth in digital transformation, 26%. We're decreasing the amount of money that we've made into cybersecurity. From our perspective, the whole market in the region is decreasing for many reasons. The end user hardware and software are decreasing is something that we are expecting. IoT and others, actually, we've managed to do around EUR 1.2 million to EUR 1.3 million in IoT business. The others are different positive components like racks, air conditioners and different passive elements. That's why we're categorizing it in others. So basically, we are paying the bill for IoT and making a little bit return on the investment that we've been making with IoT. We have restructuring that department. So currently, we have 6, 7 people only over there. Most of them new. So we reimagine IoT and for the time being, it's giving some results already. Okay. So what else to share about 2024 before going to 2025, or let's go on 2025, and I'm going to make remarks. So what we expect in 2025. So we expect to have a 21% growth in terms of revenue, which is more or less, if you are looking into the historical data, this is something that -- more or less is something that we do. So this actually EUR 136 million is without any M&A activity. So without any acquisitions. This is purely organic growth, including, of course, already 7IT, but organic growth, which is, again, something that more or less is doable based on the historical data, and not only of course, we are expecting to have a 21.1% of gross profit margin. So let's call it that it's in the middle between 2023 and 2024, which I believe for the type of business that we have in that we are having in the region more or less that's where we are in the gross profit terms. When we start doing a little bit more recurring business, especially in the West, we're going to be making a little bit better gross profit margin, you're going to see that in a while. So we believe that we'll be able to achieve pretty much the same percentage in terms of gross profit and net profit, getting 0.3%, 0.4% better margin change in percentage points and get to around EUR 12.8 million of EBITDA next year or 9.4% EBITDA margin. So we are expecting next year to grow the sales, marketing, general and administrative part, only 12%. So this is something that we've been talking for the past 2 years that making those investments in the West, making those acquisitions, making those delivery capacities, new products and so on and so forth is actually generating a lot of expenses in the sales, marketing, general administrative field. And actually, there is not any kind of revenue coming in the short term. And we believe that the 2025 will be the first year that we will stop that -- how to call it, extreme growth in the sales and marketing expenses and G&A expenses. So SG&A and the SG&A will be -- will grow more or less the growth of the revenue and the gross profit we outperformed the growth into the sales, marketing and SG&A part, which was something obviously that we were doing for the past 2 years and 2025 will be the first year that we're going to see that effect. So yes, you're going to have that as a reference. In terms of investments, so in the new markets and new business, we're going to decrease by 31% or EUR 0.6 million, the net effect. So the investments in the West, actually, they are bigger in terms of absolute numbers that we are investing and betting over there. But we have a strong belief that we'll be able to generate some gross profit out of that, that will cover most of the investments that we are making. So we're going to decrease that. In terms of East investments, that's the -- actually, as I told you, last year, we had 3 or 4 months investments in Albania and the full year investments. We kind of knew that in the beginning of the year or actually somewhere in March, April that there is a big chance that we're not going to succeed in Romania. But still, we have some ongoing things and things like that. But anyhow, we are decreasing that to the minimal level that we have in order to sustain the contracts that we have, which end -- in the big end of 2025 for September, October 2025. Center of excellence, a little bit bigger increase in center of excellence comparing to last year. But again, I told you that this is one of our biggest priorities, one of my biggest priorities. The other priority for me is the M&A part. So those are the 2 things that are in my priority list. And yes, I'm questioning, which is the third one, but just a lyrical bracket here. So yes, the third place is digital transformation, which stands for operational organic reorganization or growing business or sustaining the growth in Bulgaria, which is quite important for our financing. Yes. So this is -- so top 4 is easy, top 3, I don't know. Anyhow, most probably the digital transformation is a little bit more important right now for me. to give a platform for all those M&As that we are pursuing and things like that. Anyhow, so the M&A part here is smaller this -- so I -- so we are currently in a process. I've shared with you that -- so I'm going to make again a small note about the M&A activities that we're making. I think that this is the right place in form. So I told you about Romanian market that we actually dropped that market from our potential growth markets. During the past 6 months, we have extended an offer towards a German company. Unfortunately, it was declined by them. We've learned a lot from that. And one thing, actually, there is a common similarity in Romania as well is that it is a small company. The -- 1 or 2 owners that are moving the company, and they have around 5 to 15 people with them generating relatively good revenue between EUR 10 million and EUR 16 million and EUR 18 million. And if you have that kind of a lean organization, you have a good EBITDA margin, good net profit. So the owners of those companies are feeling well where they sit. They have aspiration to sell because they want to be part of something bigger. But honestly speaking, the -- having 6, 7, 8 years generating more than EUR 1.5 million net profit is according to my point of view, of course, they don't agree with that, and some of you may not as well, but they spoil you. And if I can -- and obviously, if you're one person with another 5 to 15 people around you, you are the person who is driving the company. So we want you to stay in the company for the next 2, 3 years. And if you want to be part of something bigger so you need to put a lot of effort, but most of those people, they don't want to have a different -- yes, let's call it, direct different boss. They've been used to be their own boss and this is one price -- this is one side of the problem with that company. The other side of the problem with that company is that they're so lean, but they cannot grow be so lean. Lean also known as small and incapable of growth. They don't have sales. They don't have marketing. They don't have PR. They don't have HR. They are more or less one person with somebody that's helping him on the financial part and a couple of engineers. So it's very hard to -- and you have a good EBITDA. And it's very hard to negotiate a price that actually is showing the proper potential of that company and to protect the investors' interest or our interest into the future, because if we buy a company generating EUR 2 million of EBITDA with 10 people, we most probably -- the first year, we're going to eat at least half of the EBITDA trying to put a lot of efforts on people and expenses into growing that company. Anyhow, we saw that in Romania, we saw that in Germany, we -- actually, we saw that in -- we had a prospect in Lithuania. Again, the same problem. We were looking into -- so as a summary of what we have done. So we will be doing Germany. We've been doing Lithuania when the same problem, the same offer, the same drive of rationale from our side, what we want to do and bonus in the future, but they want the money upfront. And I don't want that. So anyhow, again, we don't -- we won't be able to strike a deal there. There was one entity in Latvia that we will be working on. Again, we declined to give an offer over there because they were -- they didn't have a developed management layer. So if we buy the owner and there is no management and we need to search for a management, yes, it's getting complicated. So then we've been working on another entity in Germany. And currently we have to halt our prospects, let's call it like that. The first company in Slovenia. So it is -- we are in a very -- we're in the late stage. So there, we have a nonbinding offer extended before 2 months. We have already agreed a lot of the things into the SPA and management contracts and things like that. So we are very advanced over there. We're waiting for a confirmatory due diligence. We're using one of the big 4 over there. It's a big company. It's generating around EUR 40 million of revenue with around EUR 4 million of EBITDA. So it is a relatively big company. And again, it's not included in our projection for 2025 from further. We're hoping that till the end of the year. So in the next 2 weeks, we're going to have the final confirmation. And then hopefully, we'll get an approval from the Supervisory Board, and we're going to extend the -- an official offer towards that company, and that will be the [force] of moment that we're going to share a little bit more data with the publicity. I don't know when we're going to be able to finish the deal? When will be the long stop date because of regulatory, [indiscernible] regulations in the Slovenian market. So we're going to see what will happen. But hopefully, April, May, we're going to be able to start consolidating the revenue of that company. But yes, we're going to share more details when we've got something concrete because still we are in the if maybe, what and so on and so forth. We are in a middle negotiation with a company in France. We're just a little bit surprising even for myself, but actually, it's an interesting opportunity. That company has around -- it is generating around EUR 25 million of revenue with a significantly lower EBITDA margin because of the way they've been conducting business in the past 2 years, which actually is an opportunity for us to enter right now, not for the whole company, but making a partnership there because obviously, the French market is a complicated market. So anyhow they're doing a predominant time and material kind of business, working directly with very, very big names over there, very big names. So it's a completely recurring business, completely half corporate, half government, but maybe a little bit more corporate than government that they're doing with the government as well in France. There is a huge potential for upsell and cross-sell over there. There is a huge potential for growing outside of France. There is a huge potential for making a much better delivery -- optimization of the delivery costs delivering from Bulgarian for the region. So yes, that's why I'm surprised. I'm always thinking about that the French market is very close. But what I'm seeing right now, and of course, it's a question of -- a lot of questions need to be answered priorly to go further and we're already asking those questions, and we get some of the answers. But from where we stand right now, it seems that this could be not a bad thing. They have something in Luxembourg and Belgium as well. So it's definitely an interesting company. We're looking into the Italian market as well. And yes and we're constantly looking for different targets over there that makes sense for us. We have some partners, our -- one of our -- some of our investors like CEECAT are helping us in that, but we are already known in the market. So if something is to be sold, that has something in relationship to us more or less we get to know about it. So anyhow, this is just a summary of where we are with the M&A part. Okay. So coming back to the investments on the functional side, pretty much you're seeing pretty much the same budget for GRC and ESG. We have 5 people or 6 people over there. Digital transformation, a little bit bigger increase over there, which is not something big. I'm going to speak a little bit more about digital transformation, but before that to spend a little bit time on the academy part. So we are not increasing the cost of the academy per se. We're increasing how we perceive the academy and how we organize structuring the cost in the P&L basis. So prior in the past 2.5, 3 years, while we're running the academy, we were able to, every 3 months, we're graduating between 10 and 50 people, 15 people, depending on how good they are. And they spent 6 months in the Academy and then they go in for about 6 months into the service delivery where, for me, I'm calling it level from an IT perspective, from an IT support management perspective. And in those 6 months, they're learning the accountability that we're learning to work in a corporate structure, they're learning to -- they're learning to soft skills like handling tickets, handling clients, handling communication. So the first 6 months, our technical training in the next 6 months are more like on the soft skill part and accountability. So -- but the team with us with our organization is that the service delivery part is not requiring that much of a people, those 10 to 15 people every 3 months. And we are locking the capacity actually to move the academy, the people that are graduating the academy to the company itself. But -- and still, the company has its needs for young people, for new talents, because if you want to disrupt the market and maybe it sounds a little bit too heavy. But still, we are disrupting the market, maybe yes, we are not a SpaceX or Tesla, but we are still disrupting the market, and that's why we are growing. And sometimes you need to new people, you need to mine that doesn't have the luggage. So it's extremely important for us to being able to put that people from the academy into operations. And so we are -- actually what we're doing is we are not moving the people on into service desk and priority to that, when they graduate the academy those 6 months, they're going to the service desk and you don't see the cost here because the service desk is actually apart from our operations delivery cost of sales, and you don't see it here, is decreasing the gross profit margin, and that's it. But currently, from 1st of January, what we're doing is after those 6 months, we're moving them into a special department that's going to be 6 months. They're going to be managed by specific people, team leaders and guys that are going to help them choose the better position into the company, and they're going to be moving every 2 weeks into a different part of the company. And when they fit on the specific place, when they click on that place, then we're going to move the costs associated with that particular people, person in the academy to specific department. So we're changing a little bit the model. They will spend a couple of months into a service desk, but only a couple not 6 to 9 months right now as the spending, but only 2 months. And still, we're not going to counter the cost to that specific operations department and operations delivery. So -- and into the Juristic part, in the sake of time, I'm going to keep -- we're doing a lot of things there, ERP, CRM, IT service management, IT business management, IT operation management, cost management, parkings, hot desking, learning management systems, HR management systems, digitalizing everything from end to end. So I can speak about that for 2 hours or so. So there are a lot of things there because I believe that this is -- it's extremely important when we're growing the company, when we are acquiring companies. The digitalization, the tooling that will support the proper processes will actually allow us to grow to align, not to introduce too much of a bureaucracy because the other -- if we don't digitalize, we need to include a lot of people, a lot of people with a lot of processes, and it's coming to a bureaucracy and not alignment between different countries, not unified company and so on and so forth. So yes, that's why we're spending those money. We have done a lot in 2024 and -- but we still have to do a lot in 2025. Anyhow, revenue by invoicing region, Bulgaria is growing by 24% with a little bit less of a margin, the Serbian group, Serbian, Bosnia, and again the organic Slovenia business is decreasing. This is -- more of it is 2 telecoms, actually, but not we are decreasing a little bit the gross profit margin expectation as well again, something very normal for the telco sector. The HR -- the Croatian market is we are expecting to have a 25% increase in the Croatian market. We're expecting to see a little synergies and more like proper motivation on the Croatian team to do business, which is part of the story for acquiring those companies. And again, a little bit better gross profit margin on the Croatian side as well. I told you Southwest Balkan, we don't expect anything. Romania for us is a zero-sum game from the point where we're standing. And the West market, we expect to grow 3x, but generating around EUR 5.8 million from EUR 1.5 million that we are generating, and generating a better gross profit margin. So yes. Sectors. So the biggest growth, so we expect a drop in the telecom sector by 31%. We increased the drop in the enterprise sector by 30%, which is the enterprise sector is -- although we are growing in the enterprise sector, quite a lot in line what was 96% in 2024. It is still the regional business that we do with the enterprise sector is a project-based business. So -- and we're working with a couple of financial institutions. We're working with a couple of other clients. And there are seasonalities. They're investing a lot of money today. And for example, the IT infrastructure that we are mainly involved with those clients for the next 2, 3 years, you don't invest as well that you have such kind of hiccups. And that's why we're trying to move that business into more like recurring managed services kind of a business. But still, 18%, we're going to come from that. And we believe that the biggest growth will be from public sector both in Bulgaria, we have huge expectations and because the government spending is Bulgaria -- in Bulgaria is not shrinking, but not moving with the pace that the European Union is moving and even the countries in the region are moving. So there is a big potential for growth over there. We've been talking a lot about the potential of public sector and the importance of public sector in Southeast Europe. But anyhow the Croatian company is generating a lot of its business from government Bulgarian entity as well. So we believe that this will be the growth. And very fast, I'm going to go for the projections for the 5 years. Again, this is without any acquisition in place is purely organic perspective. And yes, this you can imagine, the further we go into the year, the more question marks we have, of course. But anyhow, we believe that with the strategy that we are currently having and all the updates that every day we get from the market, we believe that we will be -- we have a CAGR of around 16%, 24% to 29%. And we will be reaching around EUR 230 million we're going to increase the gross profit margin and the other margins as well. And yes, we're going to get to -- in 2030, we're going to get to around EUR 35 million of EBITDA margin without any kind of acquisitions. If you look from a 25% to 26% which is much closer, 29% to 26% is a modest growth so around. So let's call it -- I'm not calling it conservative because when you are into this project-based business and still a big portion of that revenue is from project-based business, getting to the same that you've done last year is not easy and grow that kind of a business, we think that particular example, 11 million, 8% is not easy. So -- but still, if you're looking from a historical perspective, we are growing 15% to 25%, somewhere in the middle year-over-year. So we are expecting 8%. So 2026 season is a little bit more conservative. But as you can see, we are increasing the gross profit margin, and we are decreasing the portion of sales and marketing and G&A expenses. And actually, this is increasing the EBITDA margin and things like that. So -- and that story continues through the year. Actually, what is happening is Bulgaria is more or less staying where it is right now, a little drop 2026 because of European Union's kind of seasonality, let's call it like that, and of recovering resiliency fund, which it's unknown right now. but we are being conservative here then a little growth, hopefully, with the economy, not only the European Union, but the economy as well. But still, we are modest when we look at the Bulgarian market, especially in the next 2 years. This is the Serbian market, the Bosnian market, it is relatively -- we believe that after restructuring of the telcos that we're working, they will start increasing a little bit the CapEx part, but nothing fancy, we're not even close to what we had in the past years. We are decreasing the whole thing. As you can see, in 2026, we have a huge drop here because we believe that it will happen and then a slow recovery, but not getting to the numbers that we were in prior years, even 2024, where we have EUR 13.5 million, we are expecting 2029. So very conservative over there. Croatian market, a CAGR of 16%. So we would grow of the company, we would grow the market. We put our -- growing in our presence on the Croatian market. We put differentiators like -- and synergies, differentiators from center of excellence and synergies due to these digital transformation kind of things and more M&A activities. Southwest Balkan, more or less flat. And yes, the biggest potential for us, obviously, especially in '28 and '29, which if you're comparing to our last plan, we are feeling more realistic, let's call it like that, about the West market or let's say it more conservative about the rest market because I believe that the West market is going to be 0-1 on some of the game. It's going to be black or white. I mean, if we manage, and I believe that we are on the right track, if we managed to acquire 5 -- in the next 3 years, 5 big clients, those numbers here are conservative. If we are unable to find any clients in the next couple of years, then we definitely have a problem. And -- but as you can see, our strategy is not only built on that. That's why we have been putting a little bit more perspective and a little bit more power into the M&A in the region because you can see that with the 7IT and the Croatian acquisition, we expect to give us EUR 30 million in 2029. And if we acquire that other company and do a good job, then we will have around, I don't know, EUR 65 million, most probably coming from that acquisition. So there is -- there are -- so the M&A in the region part, including Bulgaria as well, differentiating on the Bulgarian market and the regional market is quite important for our growth. So we don't have one -- we are not putting all the eggs in one basket to put it like that. And speaking about the West, this is the reason actually why in the West we're looking for an M&A as well. This is why we have been looking into this West -- into these companies in Germany. This is why we're looking into France, and we'll continue to look for such companies. So basically, our growth strategy in the West is M&A and/or sales guys and/or partnerships with bigger companies or companies that we have a complementary when we are talking with 3 or 4 companies like that right now and our business developers on a success fee. So we are exploring 4 of them. Again, not putting all the basket -- all the eggs in one basket. So yes, it's intriguing. It's definitely interesting part. And this is a graphic that's showing actually how our sales and marketing and G&A expenses, we believe, will go through the years. And we believe that we're going to be more or less decreasing debt expenses in the next year rather than increasing them. Okay, I think that I was -- I talked a little bit more than usual. So yes, I hope that you get an idea where we are and what are our priorities and where we stand. And yes, I will be happy to answer some questions, if I can. So Faris, back to you.

Thank you. Thank you for the extensive presentation. We did have a lot of topics to touch on today. So we can officially launch the Q&A session, and we already have some questions in. Mr. [Christoph Georgiev] has asked a couple. It sounds that you are quite actively looking at acquisition targets outside of originally discussed German and Romania markets. Two questions. First one, are the multiples still attractive, they have recovered since the dip around 2022, '23? And the second question is related to that, what gives you confidence that the strategy of acquisitions financed by debt would provide to be successful? You have mentioned in the past that you need size to compete in the western markets, but would that give you some other kind of advantage of opportunities?

So firstly, yes, we are looking into -- we are -- our initial idea was that we'll be looking for M&A targets just in the Southeast Europe. And we -- our initial thoughts were that we are too small and the West market is too big for us to find a proper company in the West. And it could be the case, honestly speaking, but what we are seeing is that it's quite hard to get a proper sales guys and things like that. And it's pretty much the reason why we are investing in Southeast Europe in M&A is because it's going to be really hard -- there are very few people on the Southeast market fewer than the West market, of course, but a few people can really develop from their own. It's easy to have a machine that's working and to find a couple of account managers or sales guys, but it's really hard to start from scratch and develop some business from ground zero. And it's true for the West you have such people -- I mean, in Southeast Europe, it's very hard for us to acquire those people. I'll give you an example. It's going to be very hard for somebody to come and take me and put me into a new entity, completely new entity coming into the Bulgarian market. And I've been doing that business for 20 years, and I'm successful, most probably, I can develop business on my own. And -- but it's very hard for those people to acquire me without acquiring the company. That's why we're doing M&As in Southeast Europe. And when we go abroad, our initial take was those markets are much more commercial. Those markets are much more bigger. Those markets much more liberal, if you want. And you should be able to find -- if we give enough money, we should be able to find the proper sales guys over there. And we haven't -- and we're still trying. But -- but the chance of us find the proper sales guys over there is getting slimmer and slimmer, because the risk for those guys to join a newbie, a newborn company in Germany or France or U.K., the risk profile is too much and those big guys, they don't want to move to risk and things like that. So that's why we're starting to look more into partnership and more into acquisitions. And to us, so we are currently looking into acquisition targets all over the place. The Netherlands is a good market. It's a good market. Even Sweden is not that better market. U.K., of course, so all the place Italy, Spain or the place. The question is, can we find the proper targets. And yes, we're looking for if we can find in Germany and France, most probably we can find somewhere else as well. About the multiple it's -- I think that it's not very -- I mean the deals that we're looking after are not with that big of a multiple. We're trying to not approach companies that we believe that the multiple or even the absolute number won't make sense of the example that I gave you with a small company 10 to 15 people. But yes, I believe that there is still a chance, especially in Germany. Even in France, I mean, they are in a different situation from a macro and micro-economical point of view, a lot of things are happening over there. So I believe that we're still able to find a proper companies over there on a proper multiple. So in that respect not -- or at least we don't see that kind of an increase, and we are making a constant analysis of different size, different deals of the same size of those markets to make a comparison -- market comparison. So we don't see that much of an increase in that respect. So this is about the price. What was the second question?

The second part of the question was related to that, what gives you confidence that the strategy of acquisitions financed by debt would provide to be successful? You have mentioned in the past that you need size to compete in the western markets, but would that give you some other kind of advantage or opportunities?

Those are 2 questions more or less. But do we believe that we can continue growing and buying those companies. So obviously, the M&A part will be an important part for us. Can we continue in growing financed by debt? It is a risky business if we continue to do it like that. I mean obviously, the projects that were involved, they require a lot of working capital. The companies that we are acquiring are not so different from us. So they have working capital needs. Some of them have some short term. Some of them have a long-term debt as well. So for me, if you ask me, it's not -- for me, and I have spoken about that a couple of times. I want to look for some kind of a different way of finding money to put it very, very wide, very not concrete to put it like that. So definitely, we will be -- and we were spoken about that in the past 6 months, but let's call it that we're a little bit more focused on can we grow, where can we grow? Can we find the proper companies? What's happening after you acquired the first company in the 7IT. So it was not that much on the table. But having those 2 targets and having more targets on the horizon, at least 2 or 3 more that we are currently in the initial negotiation in Italy and in Germany. Obviously, we need to find a way to increase the capital, and it's going to happen from the very beginning of the next year. We're going to start looking for a partner that can help us in analyzing where we can find that capital? Which is the market? What is the way? What is the financial facility? So I believe that I will have the support of the Supervisory Board for going into that direction and hopefully, the shareholders of the company. So definitely, I don't believe that we will continue growing -- doing M&A finance by just debt or not such kind of debt. So it's -- so I'm going to be searching for helping that perspective, definitely. And most probably, you will hear more next year. So there are plethora of options. So yes, there are a lot of options for growing capital. The question is, which is the most relevant and the most yes, the most -- what's making the most of a sense. And the third question about does that size matter. So yes, a size matter for the West and a lot of things actually. And -- but step from the size, for example, looking into that company in France, it's an interesting perspective. Because obviously, they're doing time and material business, which is how the French market is very well organized and very -- and those companies are very well protected by the government. This is something that we don't like doing a lot, and we are not doing it out of Bulgaria, but it's in France, it's -- and actually, in West Europe, it's a completely different game play. And we need to adapt if you want to go into that market. So buying a company that's doing time and material will give a size. It's around EUR 20 million, EUR 30 million of revenue with very big names over the completely service business, completely recurring, great. But actually, to give us -- it will give us the PR, but it will give us the market share, and it will give us the possibility to do a cross-sell. And it will give us definitely when you go to even not in France, maybe in states or in Germany, and you have -- and you say I have 200 people in France, it's a different story. Plus, for example, in particular, in France, it's a distant opportunity. So -- but we may start looking on the North Africa and the part of the North Africa that is influenced by France. So it's interesting. It's -- again, it's a distant opportunity because a lot of geopolitical things that are happening over there, but it's a different team. So we are not buying those companies just for the size, but it's about market share, PR, marketing, presence, access to clients, obviously, cross-sell, upsell. So a lot of things, a lot of things.

Thank you for your answer. I hope that answers all the questions of Mr. [Georgiev]. And we have a question from Mr. Mark Label. What is the pipeline for EU-funded projects in Bulgaria and what tension is there for the government to allocate the funds to projects before the program expires? And has this changed in recent months?

The pipeline, not only for us, but for the whole market is huge. For example, for the recurrent resiliency fund, if I'm not mistaken, I don't know if it's public information, I have heard in an interview from some politicians that our utilization rate from the public and recovery fund is only 10%. And we have close to, what was it, EUR 5.6 billion and it ends into the middle of 2026. So for 1.5 years, you should spend 90%. Obviously, it's not going to be possible for the country, and it's going to be a negotiation and things like that with the European Commission. So unfortunately, there are a lot of questions with a lot of technicalities to put it like that. But what I believe and what I hope is that what I know is that the whole European Union is lagging behind with the recurrent resiliency. And I hope that there will be extension for the whole European Union for that program, which I believe it happened before. I think that it will happen again. It was initiated for the COVID, but actually, there was a war, not one war. And I believe that the European Union will say that this slowed process of utilizing the funds and they will prolong, I hope, really. For the other, we have a lot of other funds, not only the resilient, cohesion funds and things like that, which end -- in the end of 2027 where I don't know the percentages over there, but I will speculate that it is, especially in the IT, it's less than 4%. And so there will be 2 years, they need to spend the government a lot of money over there, a lot of me. So basically -- and I'm speaking for Bulgaria, but it's similar for the other countries, they are a little bit better than Bulgaria, but similar. So I believe that the pipeline for government-related project is huge in the next 2 years. Yes, there are a lot of questions. But there is a big incentive for everybody country-wide, geopolitical wide, obviously, the corporate sector that's attracted to those money and things like that. So a lot of incentive for a lot of players. And I believe that they will make everything possible to make that happen. The second part of the question was happening, especially in Bulgaria current days is that it's -- honestly speaking, it's -- they're trying to speculate. I mean, -- we are in a constant eight. We already had eight elections in 2, 2.5 years. And obviously, in such kind of situations, when you have a temporary government or permanent but kind of a temporary government for 6, 9 months, you have a lot of social-oriented measures. And it's a problem how to spend the CapEx part. It's a problem of what will be the short and long-term even strategy. So it's hard. I won't lie. It's hard. It's hard for us trying to push as we could to -- for the government to allocate those money into a meaningful projects. So it's hard, but it was hard in the past 2 years. And I believe it is not going to be easy in the next 2 years, but it's not impossible.

Thank you for your answer. We currently have no more questions come in. We can give people a few minutes maybe because we also went past the duration of the event. To see someone else is curious for something else before we wrap up the session. So if anybody has a question, now is the time to ask. I suppose people might be now in a festive mood and ready for the holidays. So maybe yes, we can wrap this one now. So thanks, everyone, once more for attending these sessions throughout the year. Thank you for being attentive and asking questions and logging in. We will continue with them in the New Year, of course. And from my side, I'd like to wish you a Merry Christmas and a Happy New Year, lots of health, and we'll see you again in the new year.

Thanks from my side as well and have some time to rest and to recuperate. And yes, and see you next year. Thanks. Bye.

Bye, everyone.