Zalaris ASA (ZAL) Earnings Call Transcript & Summary

Good morning. My name is Adele Pran, and I am the Chair Leader in Zalaris. It is a pleasure to welcome you to the Annual General Meeting for the accounting year of 2024. I confirm that the general meeting has been duly convened and has a quorum. The order of the day is described in the notice, which has been distributed in accordance with the company articles and the Company Act. With me are the company's CEO and CFO, Hans-Petter Mellerud and Gunnar Manum. We will follow the order set in the notice, but we will open up for the questions towards the end. In April this year, Zalaris marked its 25th anniversary, which was celebrated at all Zalaris offices together with all the loyal employees. It was nice to do this at a year where Zalaris yet again delivered all-time high revenues and earnings. In 2024, the company had revenue of NOK 1.346 billion, which represented a growth of 19% from 2023. The EBIT came in at NOK 147.5 million, which lifted the EBIT margin to 11% and implied a growth in EBIT of 54% from the previous year. This is a result of the strategy work increasing revenue and margin in the DACH region and increasing the efficiency by digitizing. This work continues through new innovations, the use of AI and launching new products. We have won and implemented new large customers in all regions, and the strong pipeline will support the continued growth for the coming years. More detailed information about the company and the accounts are presented in the annual accounts for 2024, which can be downloaded from the Zalaris web page. For this AGM, we have recorded attending shareholders of 15,013,960 of the total voting shares, which are 21,732,069 shares, and this represents 69.1% represented voting shares. A list of shareholders represented will be attached to the minutes. We can then start the meeting, and the first item is to elect the Chairman of the meeting. It is proposed that I, as the Chairman, will chair the meeting and the proposal has been voted for by 100%. Item 2 is to approve the notice of the agenda. It is proposed that the Annual General Meeting approves the notice and the agenda, and this has been voted for by 100% of the represented shares. Furthermore, in Item 3, we will elect a person to co-sign the minutes, and the proposal is to elect the CFO, Gunnar Manum, to co-sign the minutes. This has been voted for by 100%. We then move on to Item 4, which is the approval of the annual accounts and the directors' report for the financial year 2024. This is also including the Board of Directors' proposal for distribution of dividend. The annual accounts and the directors' report for Zalaris for the financial year 2024, together with the auditor's report are made available on the company's website. In accordance with Section 8 of the Articles of Association, the profit after tax for 2024 was NOK 33.4 million. The Board of Directors proposes a dividend of NOK 0.90 per share based on the company's annual accounts for 2024. The dividend will accrue to the company's shareholders as of the date of the Annual General Meeting, which is today, the 22nd of May. The company's shares will be traded exclusive of the right to receive dividend from and including the 23rd of May. The proposed resolution is that the Annual General Meeting approves the annual accounts and the Board of Directors' report. And based on this approval, that the Annual General Meeting also approves a dividend payout of NOK 0.90 per share. This has been voted for by 100% of the represented shareholders. We move on to Item 5, which is approval of the auditor's fees. The proposal is that the Annual General Meeting approves the auditor's remuneration for 2024 in accordance with the approved invoices. This has been approved by 100% of the votes. Item 6 is the determination of the remuneration to the members of the Board. The proposed resolution is that the Annual General Meeting approves the remuneration to the Board members for the period from the Annual General Meeting in 2025 to the Annual General Meeting in '26, set to be NOK 600,000 for the Chairman and NOK 300,000 to each of the other Board members. Furthermore, the Annual General Meeting approves that the committee work will be remunerated from the Annual General Meeting in '24 to the Annual General Meeting in 2025 with 80% (sic) [ NOK 80,000 ] to the Audit Committee leader and 60% (sic) [ NOK 60,000 ] to the members and NOK 40,000 to the Remuneration Committee leader and NOK 30,000 to the members. This has been voted for by 100% of the representing shareholders. In Item 7, there is a proposal of the remuneration to the members of the Nomination Committee. It is proposed that for the period from the Annual General Meeting in 2024 to the Annual General Meeting in 2025, the remuneration to members of the Nomination Committee will be NOK 30,000 to the leader and NOK 25,000 to the members. This has also been voted for by 100%. We then move on to Item 8, which is election of Board members. I would like to refer to the Nomination Committee's proposal, which is available on the company's website. The Nomination Committee has proposed that the existing Board will be reelected for a period of 1 year until the Annual General Meeting in 2026. The proposal implies that the Board will then consist of Adele Pran, myself as the Chair; Liselotte Engstam as a member; Jan Koivurinta as a Board member; Kenth Eriksson as a Board member; and Erik Langaker as a Board member. 97% of the present shareholders has voted for the proposal. And we move on to Item 9, election of the Nomination Committee. Again, the Nomination Committee's proposal is available on the company's website and can be read in more detail there. The proposed resolution is that the Nomination Committee will consist of Bard Brath Ingero as a leader, Sven Thoren and Nicolay Eger as members. The proposal has been voted for by 100% of the representing shareholders. We then move on to Item 10, which is the consideration of the Board of Directors' statement on corporate governance. In accordance with the Norwegian Public Limited Liability Companies Act and the Oslo Stock Exchange continuing obligations for listed companies, the Board of Directors has prepared a statement on the company's principles and practices for corporate governance. The statement is included in the company's annual report for the financial year 2024, and it is based on the Norwegian Code of Practice for Corporate Governance dated 14th of October 2021. The company adheres to the code with the exception of a few items, which are clearly explained and justified in the statement. Our approach to corporate governance is founded on transparency, accountability and equal treatment of shareholders. It is designed to ensure long-term value creation, sound risk management and effective oversight of the company's operations. Key areas covered in the statements include a clear division of roles between the general meeting, the Board of Directors and executive management, a competent and independent Board, sound internal control and risk management practices, remuneration policies and guidelines and timely and reliable disclosure of information to the market. Again, I would like to state that -- I would like to inform that the statement is included in the annual report, which is available on the company's website, and it can be read in detail there. We move on to Item 11, which is an advisory vote on Zalaris' remuneration report for senior executives for the financial year of 2024. In accordance with the Norwegian Public Limited Liability Companies Act Section 6-16b, the Board of Directors has prepared a report on salary and other remuneration to the CEO, to other senior executives and the Board of Directors. The report has been reviewed by the company's auditor in accordance with the Norwegian Public Limited Liability Companies Act Section 6-16b. The report shall be considered by the Annual General Meeting by way of an advisory vote. The report is available on the company's website and can be read in detail there. The proposed resolution is that the Annual General Meeting endorses Zalaris' remuneration report for senior executives for the financial year of 2024. 53.5% of the represented shareholders has voted for the resolution. We will then move to Item 12, approval of guidelines on salary and other remuneration to executive personnel. The Board of Directors has prepared amended Remuneration Guidelines and Policy for Remuneration of Senior Executives of the company. The guidelines have been prepared in accordance with the Section 6-16a of the Norwegian Public Limited Companies. The guidelines are subject to approval by the Annual General Meeting in accordance with Norwegian Public Limited Companies Act Section 5-6, third paragraph. Although such guidelines only need formal approval every fourth year or if material changes have occurred, the Board considers good corporate governance to seek approval annually. This we do even when only minor amendments have been proposed. The guidelines are available on the Zalaris website and can be read there in full. The proposed resolution is that the Annual General Meeting approves the Board of Directors' Guidelines and Policy for Remuneration of Senior Executives. Approval of the guidelines have been voted for by 52.7% of the representing shareholders. We then move on to Item 13, which is the authorization to the Board to increase the share capital for redemption of shares incentive programs for employees. In order to provide the Board with flexibility to carry out share issues in connection with the settlement of share incentive programs for employees approved by the Annual General Meeting, it is proposed that the Board is authorized to increase the share capital of the company by up to NOK 80,000. This corresponds to approximately 3.6% of the company's share capital. And the reason being that it's only going to be used in relation to the settlement of share incentive programs for employees. The proposed resolution is that pursuant to Section 10-14 of the Norwegian Public Limited Companies Act, the Board is granted authorization to increase the Company's share capital with up to NOK 80,000. Furthermore, that authorization can only be used in connection with the exercise of incentive programs. The authorization is valid until the earlier of the Annual General Meeting in 2026 and 30th of June 2026. Also, upon registration with the Norwegian Register of Business Enterprises, the authorization replaces the authorization to increase the share capital granted by the Board by the Annual General Meeting last year on the 19th of June 2024. The proposal regarding increase in the share capital has been voted for by 98.5% of the representing shareholders. We then have the last item on today's agenda, which is an authorization to the Board to purchase the Company's shares. To allow the Board flexibility to effect repurchase of shares, it is proposed to grant the Board the authority to purchase shares in the Company on behalf of the Company with a total nominal value of up to NOK 221,352. This corresponds to approximately 10% of the company's share capital. The proposed resolution is that pursuant to Section 9-4 of the Norwegian Public Limited Companies Act, the Board is granted authorization to acquire shares with a total nominal value of NOK 221,352. This authority may be used one or several times during the period. The highest amount which can be paid per share is NOK 160 and the lowest is NOK 0.10. The Board is authorized to acquire and sell shares as the Board finds it appropriate. Acquisition can nevertheless not be done by subscription for shares. The authorization is valid until the earlier of the Annual General Meeting in 2026 and 30th of June 2026. Upon registration with the Norwegian Register of Business Enterprises, the authorization replaces the authorization to acquire own shares granted by the Board by the Annual General Meeting last year on 19th of June 2024. The proposed resolution has been voted for by 98.5% of the representing shareholders. We have then formally concluded this year's Annual General Meeting, and we will open up for questions.

Okay. So we have 2 questions. Starting with the first one. Can the CFO and the Board members speak on the capital allocation strategy regarding dividends versus share buybacks? Current share price is, in my opinion, not reflecting the fair value of the company when compared to other private public SaaS companies. What are the CFO and Board members' consideration in terms of capital allocation going forward? So I think maybe I should at least start with some comments.

Please start.

So the communicated dividend policy of Zalaris is to pay 50% of the results in dividend. And also, we are limited by the current bond agreement, which limits the distribution to shareholders either through dividend or share buyback to 50% of the result before tax. Hence, the dividend that was proposed is in line with this policy. Now should the company decide to refinance the bond loan before its maturity date in April -- March, April 2028, we will make another assessment regarding the distribution to the shareholders, either through dividend or share buyback. Any other comments to that?

No, I think that's -- that we're fully aligned and with respect to -- we can't comment on the valuation specifically, but that we, of course, focus on the capital allocation -- efficient capital allocation with the goal of maximizing the value of -- for shareholders at all times, but are limited by this current bond agreement in terms of larger payouts than what is currently proposed.

Yes. Obviously, the Board will, at all times, consider what is the correct financing structure to allow for maximizing the shareholders' value. And in this respect, we also will have a focus on returns to shareholders through dividends or share buyback in the coming years, given that the company now has a solid cash flow that we expect will continue going forward.

Next question then, can the CEO and Board confirm that it's still the ambition to complete the strategic review by Q2 regardless of the outcome? Hans-Petter?

Yes, I would say so. We have -- we said so at Q1, and that's definitely our current intent.

So that's it. Let's conclude the questions.

Thank you all for participating. And we then conclude the meeting.