Bio-Techne Corporation Price & Performance (TECH)

This has resulted in some changes and tuning to our strategic direction, our go to market model, and our key priorities which I shared with you last quarter. In addition, we defined three strategic pillars to use as our guiding principles to build and shape the organization and culture we're aiming for. These three are very simple, but still important pillars to align around and ensure we build our future on. First, our people, We have the most certified and knowledgeable people in the industry. And we are very proud of the individual and collective competency we represents. This is our most valuable asset and a unique differentiator in the market both to build the software and services we need but also become more relevant to all our customers and partners. Secondly, Customer First, is simpler said than done. [indiscernible] We need to go to work every day with the mindset of how we can increase value for our customers and partners. We have great software, devices and services, but we need to understand our customers better and their pain points and to help them increase their productivity and profitability in their markets. Thirdly, optimize and accelerate. We need to fine tune our own organization and offerings prepare and rig for the exponential growth we are aiming for.

Our ambition is to become more relevant for our customers and partners and be their preferred partner to deliver manage and secure their mobile estate and accelerate their ESG initiatives. We have done several changes to the organization in the last quarters, and we are operating more streamlined integrated and optimized than before. Both from a process, tools and culture perspective. [indiscernible] This work continues as we always try to improve and increase our speed and agility. As I pointed out, when joining TextUp, I strongly believe we're in a great position to create history and become the leading mobile and circular tech company in Europe and I'm more confident than ever that we are on the right track. As a mobile and circular tech enabler and accelerator, we are serving private enterprises and public sector across The Nordics with our direct sales model and the European and global market through our indirect partner model. By combining our own software world class expertise and being one of the most certified mobile device players in Europe, we help our customers and partners create more value from their mobile estate and for all kinds of users. With our direct business model, we combine our own software and unique expertise with the broad range of different hardware and software solutions we represent to better equip our customers with the best mobile tools to optimize their work.

In the indirect partner model, we are empowering partners to deliver and integrate our highly scalable solutions and services into their core business models or as value added services to a new capabilities to serve their customers in a better and more efficient way. With increased focus on transitioning our business model from transactional and point solutions to recurring and end to end services and becoming a strategic partner helping customers transform and drive innovation with secure and sustainable mobile technology solutions. Let me take you through some of the many highlights from the fourth quarter. The profitability keeps improving and accelerating. And again, we have growth in both revenue [indiscernible] net gross profit year over year. Recurring revenue analyzed is up 6% year over year and going into the new year, our recurring revenue contracts are all time high, €19,000,000 higher than twelve months ago. And our own software is growing the fastest. With double digit growth again, 11% in recurring revenue. EBITDA adjusted is doubled in twelve months and 10 times the result going two years back. We also continued to generate positive cash flow from operations last quarter with €26,000,000 Another strong commercial quarter with great momentum across all business areas as well as our defined markets.

With several new signings and renewed contracts with key customers and partners. We have won an onboarded several new trade broker members expanded service delivery to existing members, and our large contract with ISS and SL in Sweden was delivered [indiscernible] We continue to deliver strong growth in the last months in Poland across our mobile device management solutions, and we're live and airborne with device now as a device as a service partner globally. Additionally, the announced partnership with ICE went live with its first phase during December. We finished strong with hardware and software growth in all markets and across all categories, and with all time high revenues in Sweden during Q4. I'll come back to some more updates at the end of the presentation, But first, I'll hand over to Elen, who will take you through more details of our financial results for the quarter.

Thank you, Martin, and good morning, everyone. I will take you through the financials for the fourth quarter and sum up the year. Like Martin said, we have seen a significant uptick in our revenues and profits towards the end of the year with a record high EBITDA adjusted in the fourth quarter. Finishing off a year that began with a challenging market in Sweden and generally high competition with pressure on margins. At the same time, the company is undergoing as well as internally within the organization, involving processes, systems and people. Through constant cost focus, with a long term perspective we have and will continue to optimize to assure that we are rigged for extensive growth. Martin mentioned that I celebrated two years anniversary and I can honestly say that in these three years, I have seen an enormous change and progression in the company on many levels. I am confident that with the new agreements, the new markets strategy, coupled with the efforts that we are putting into restructuring the organization, we are well positioned to successfully grow over the next coming years. So for 4% growth in total revenues. Where almost half of the nominal growth is due to revenues from owned software.

Equaling 24% year over year. The growth is in large, driven by partner sales in Europe for our mobile device management software product. The previously announced agreements with DeviceNow and ICE which are in full operation at the end of the year, are included with negligible revenue amounts as the onboarding of customers and devices started late in the year. It is also positive to see a 3% growth in device revenues. The second quarter growth quarter in a row after several quarters with a declining trend. Advisory and Services revenues encompass both transactional and recurring revenues, and it is the transactional revenues from consulting and aftermarket where we have seen a dip in activity in the last quarter. Resulting in a reduction in revenues of 2% year over year. The recurring revenues which is the managed services within Advice and Services grew year over year. Net gross profit grew by 5% from last year to NOK95 million, driven by the substantial growth in owned software. The margin on transactional device sales was stable year over year with a larger share of device as a service and profits from MW's contracts drove the total margin on device revenues to 15.4%, up 0.5 percentage point year over year.

With the effects from the declining transactional consulting revenues, total net gross profit margin ended up at 30%, at the same level as last year. EBITDA adjusted in the period was $21,300,000 up $11,000,000 from the fourth quarter last year. Both due to the growth in net gross profits, but also due to a 7% decrease in operating costs in the quarter compared to last year. Net loss in the period was 4,000,000, but consists entirely of non cash items. As we have total amortization of intangible assets of €19,000,000 in the quarter. Included in these €19,000,000 is an impairment of €3,700,000 for retired intangible assets. As for the market performance, both in WearWay Sweden and Poland have shown an underlying growth. In Norway, the recognized revenue is stable compared to last year at $180,000,000 where device revenues have decreased with 1%. We're considering the total sales, including devices sold as a service in the period, where the revenues will be distributed over the leasing period, the total device sales in Norway increased with 2% compared to Q4 last year. The net gross profit increased with 8% year over year due to profits from device as a service. Sweden experienced a 5% growth in total revenues in Q4 to $121,000,000 which primarily is driven by increased device sales offset by a decline in consulting and aftermarket revenues.

The increased device volumes are driven by larger bulk delivers and frame agreements, and margins will therefore decline in total with three percentage points year over year. The Polish European market is continuing and revenues increased with 57% from Q4 last year. Primarily from upselling owned software to existing customers. With a profit margin just below 80%. The net gross profit development over the last years has been steadily declining. As a result of both the overall decline in the global market for devices as well as increased competition and price pressure. Last quarter was the first time in years where we saw positive year over year development, and this has continued into Q4. In Q3, we had a 4% growth year over year, while we in the fourth quarter see 5% growth. Our revenue streams vary significantly in terms of recurring and transactional income. Device revenues predominantly consist of transactional income, and recurring revenues from device as a service is about 20% to 30% of the total device revenues. As such, the net gross profit will vary significantly from quarter to quarter, strongly influenced by seasonal fluctuations. The advisory and services revenues consist both of transaction where the recurring revenues are the managed services we offer on contracts over twelve months minimum.

Transactional revenues are mostly consulting fees, as well as third party software revenues. Both of which will vary with seasons, timing of contract implementation and market factors. Recurring revenues accounts for about 40% to 60% of the net gross profits. Our own software is mainly sold on recurring revenue contracts. And the net gross profit over time is more stable. In Q4, the very positive growth in Poland contributed to a substantial 23% growth in the net gross profit. Record high in TextUp history. When we report recurring revenues, we look forward. As opposed to the previous slide where we show the historical growth. Including transactional profits. Recurring revenue is measured as the last month's contractually invoiced revenues times 12. So entering 2025, we have in total €331,000,000 in contractual annual recurring revenues which is 6% or €19,000,000 higher than when we entered 2024. And again, it is the owned software revenues that are increasing the most with 11% growth. As we mentioned, we believe that the partnership agreements we have entered into with ICE, DeviceNow and now recently the European IT vendor will generate exponential growth in the recurring revenues in the next years. But as we only include these revenues as they are invoiced the reported recurring revenue at the end of twenty twenty four includes insignificant amounts generated from these agreements.

As we have just recently started onboarding of customers. How long time this ramp up will take is highly uncertain and difficult to predict, as we do not ourselves have control over the end customers. To show the scalability of our current business model, we measure the conversion from net gross profit to EBITDA adjusted. Throughout 2023, the cost optimization efforts increased LTM conversion rate from minus 6% entering 2023 to 8% leaving 2023. In 2024, we have stabilized the cost base, optimizing systems and processes to rig for growth. And during the year, we have increased the EBITDA adjusted conversion to 11%. In the fourth quarter, isolated, the conversion rate was 23%, generating the highest EBITDA adjusted in TextUp history. Further growth in the business will largely convert directly to EBITDA. Though we should expect expect slight additional increase in the cost base going forward due to inflation and investments. In the fourth quarter, we had a positive cash flow from operations of €26,000,000 after investments in device as a service, reduced from €50,000,000 in Q4 last year, and the difference is driven primarily by the change in working capital. In 2024, we had an [indiscernible] In addition, we have experienced more challenging payment terms with our large frame agreements the last year, weakening the working capital.

CapEx in the quarter was €9,500,000 above $2,000,000 more than usual quarterly run rate as we have had project costs and investments for both implementing the new part agreements as well as developing our own back office IT landscape. Normally, the CapEx should be around €5,000,000 to €7,000,000 per quarter, But as we move into several new partnership agreements, we might see some quarters with higher investments in the coming years. Net cash flow from financing activities was minus €1,900,000 in Q4. We had a capital increase in October raising net $29,000,000 in funds and we have repaid long term loans and short term credits in the amount of €24,000,000 as well as lease and interest payments. Net cash flow in the quarter was $15,000,000 and cash at the end of the quarter was $31,000,000 In addition, we have undrawn credit facilities available in the amount of $45,000,000 At the end of the third quarter, our equity ratio was 49%, up from 45% at the end of 2023.

And a total balance of about 1,200,000,000.0 At year end, we had noncurrent assets not related to device as a service of NOK805 million euros where of €632,000,000 in goodwill SEK 16,000,000 in deferred tax assets and SEK $125,000,000 in customer relations and technology. Of these €125,000,000 about €28,000,000 is related to acquired intangible assets from M and As. Will be completely amortized during first half year of 2026. In 2024, total amortization of customer relations and technology was €68,000,000 where of €28,000,000 was amortization of acquired Total borrowings was €139,000,000 and has been repaid with €39,000,000 during the year. Whereof the short term share has decreased with €24,000,000 Our net interest bearing debt at the end of $20 Liabilities related to device as a service was €189,000,000 at the end of the year. This consists of deferred revenues with future non cash revenue effects. And €36,000,000 in buyback obligations, where of €30,000,000 is long term. These future cash effects of the buyback obligation will, of course, be more than offset by future cash inflows when the assets are sold in the second hand market. Denmark will take you through our business updates, and the outlook.

Thank you, Elan. What a great financial update. With a lot of positive developments. First, let's have a quick look at the market we operate. Managing large amount of devices across multiple locations while ensuring security and user experience is no easy task. It requires expertise, processes, and significant resource investments. As organizations increasingly seek to streamline operations, reduce cost and enhance sustainability, many are turning to end to end device lifecycle management solutions. These solutions allow IT to shift their focus transformation. And that's where our unique and holistic value proposition fits perfectly to serve those needs and challenges. We focus on automation lowering TCO improving security, and Circular Tech for enterprise customers, IT vendors and operators. Thanks to our own developed device lifecycle management and mobile device management solutions, In combination with best of breed third party vendors. We offer a comprehensive and streamlined lifecycle management of your devices as an end to end solution [indiscernible] procurement to recycling. Procure allows for flexible device acquisitions through as a service or direct purchase, integrated with our lifecycle management portal. Deploy ensures zero touch enrollment for fast and seamless onboarding, delivering devices directly to users with minimal involvement. Control gives asset control and visibility to track and manage devices with real time insights.

Proactive endpoint management ensures 20 fourseven workforce productivity reducing downtime and security vulnerabilities. Automated user driven workflows simplifies device returns and replacements, and increases efficiency. Sustainable practices maximize residual value extend device lifecycles and support responsible recycling. This streamlines IT operations reduces costs [indiscernible] enhances security and sustainability. And we do this for all type of users and work scenarios. Modern workforce is increasingly mobile, spanning both office based knowledge workers and frontline workers in industries like retail, logistics, We Managing mobility for these user groups requires different approaches tools, and levels of support. Hybrid and office based professionals need seamless automated and self-service mobility solutions. Our approach ensures cost efficiency, sustainability and user satisfaction keeping employees productive while on the move. Field and frontline employees need reliable, rugged and always available mobile technology to perform tasks efficiently. Our fully managed mobility solutions are tailored to meet organizational needs and optimize workforce productivity at the edge of the business. [indiscernible] Our goal is to simplify mobility management reduce cost and enhance employee experience across all work scenarios. [indiscernible] Before we round off, let me share a positive milestone we announced this week. We are pleased to share that we have entered a letter of intent with a leading IT vendor marking a strategic entry into Airline and UK markets for Textep.

With this partnership, the vendor will adopt our lifecycle platform as their standard solution for device as a service offerings enhancing operational efficiency and customer experiences. Both companies are committed to going live with the lifecycle platform this year with customers onboarded in the fourth quarter. The commercial model includes a license fee per device per month. To sum up, the fourth quarter showed strong development with improving profitability and as we also achieved in Q3, we are growing both revenue and net gross profit. Moving into the new year, recurring revenues is record high and market momentum is strong. We have several new signings and the strategic agreements are progressing well. But we also experienced that the time and workforce are scarce resources so realizing and capitalizing will take some more time. These kinds of delays are both a result of our resource situation after several rounds with cost optimization but also the complexity, integrations and dependencies at our customers and partners as well as project creeps which in the end are positive with higher potential and more stickiness when delivered. The large Managed Health project with SykesPartner and Health Region Southeast is now into extra time. But project and different pilots are running at full steam ahead and we have a joint ambition with Cirqueus Partner to get across the finish line during this quarter.

The backlog is building up and the solution and service descriptions are being finalized as soon as possible. We are better rigged and ready for scaling than ever before. And we have been working on three year growth ambitions across our business areas and sales channels, and both the pipeline and potential are very promising. The expectation is a continued acceleration throughout 2025 but also a further acceleration and continuation into 2026 and beyond. These type of partnership and long term managed services contracts will grow and drive exponential profitability in years to come. Looking at our updated guidance for 2025, we expect strong growth in both recurring revenue and net gross profit, both growing double digit and with an acceleration through the year. As we're still in a transition, moving from transactional to as a service and with large transformational deals like product partnerships and complete mobile outsourcing, the impact to our guiding could be quite significant. As you can read in the ranges we have provided. We We stand by our ambition to become the leading mobile and circular tech company in Europe We strategy and execution going forward. And continue to accelerate our profitability. We aim to provide you with further guidance and an outlook into 2026 our Q2 presentation in August.

That concludes today's presentation. Thank you for listening. [indiscernible] We will now move directly over to a Q and A session. So please stand by if you have any questions. We will see if there are any questions posted so far. You can always submit your questions by using the Investor Relations e mail address or by using the chat function in this presentation.

Okay. We've received a question here. It's in Norwegian. So it a little bit of time translating while I do this. Question is, Techstep has down adjusted the ambitions for the next years. In Q4, you do further adjustments So the question is what is the cost of the company coming in such a situation? Can we that you will continue with adjusting down the outlook in 2025 as well.

Thank you for the question. I think we tried to to answer this during the final outlook slide. But we are fully aware of the kind of history of Techstep, and that's why we are kind of also resetting the expectations to the market. We do see great that we are turning the company around and we are increasing our profitability quarter over quarter. But as pointed out, we also know that many of these projects [indiscernible] complex with a lot of dependencies and integration as And when we are talking about this kind of product partnerships, [indiscernible] now with the new IT vendor in in The U. K. And Irish market. These are kind of ERP systems for these kind of IT vendors. To support their device as a service offerings. And we know that those kind of projects, are very complex but at the same time, you are building the backbone of those kind of companies. So when you are in there, it's it's really sticky and you're in there for many, many years. So it's important for us to deliver with the quality and deliver on the expectations with these kind of partnerships. To make sure we can grow with the partners into the future.

But we have an updated outlook, which is strong and that we strongly believe in and that we are confident with. So we have absolutely no ambitions to adjust the guiding given for 2025, at least not in a negative direction.

And there's one more question the peak sales here in Q4 was in the beginning, mid quarter. How has the market developed in 2025?

Yes. We will not say too much about Q1 or January. But for sure, we have a very strong pipeline I also mentioned that the backlog is building up due to the partnership with Sykes partner and the needs for new clinical devices in many new hospitals in Norway. So we see a strong pipeline For Q1, but there are tough competition every day. We are fighting for every deal, every customer. We are having a lot of different activities going with our direct sales force in Norway, Sweden, Denmark, around device sales together with our main partners, Apple, Samsung, Zebra, Honnovo, etcetera. So as said, I cannot tell you more about the January and Q1 development as of now. But pipeline is building, and we are positive about the and continued growth in Q1 and the next quarters. We are back on track with a growth as we also presented for both Q3 and Q4, and that's of course, the ambition to continue growing also in the coming quarters.

Okay. I think that was it. With questions.

Then we will round off. Thank you again for listening, and wish you all a great [indiscernible]