Tecnotree (TEM1V) Q4 2024 earnings summary

Executive summary

• Achieved 4% revenue growth in constant currency for 2024, meeting guidance despite significant FX headwinds and market challenges; net sales were EUR 71.6 million, down 8.7% year-over-year, but up 4.0% in constant currency.

• Transitioned to a more predictable ARR model, growing from 2 to 10 ARR customers by year-end, stabilizing revenue.

• Entered the US market, winning a tier-one telco customer and expanding partnerships, notably with HCL Technologies.

• Exited high-risk and non-core markets, focusing on core telco business and reducing exposure to sanctioned geographies.

• Board diversity emphasized, with five members (one female, four male), all reappointed in April 2024; Board remuneration reduced by 35% from April 2024 as part of cost-optimization.

Financial highlights

• Q4 2024 free cash flow was EUR 0.4 million, a EUR 1 million improvement year-over-year; full-year free cash flow was -EUR 1.8 million, up from -EUR 9.7 million in 2023; three consecutive quarters of positive free cash flow achieved.

• 2024 revenue in constant currency: EUR 81.4 million (up from EUR 78.4 million); real revenue: EUR 71.6 million (down from EUR 78.4 million) due to EUR 10 million FX losses.

• EBIT in constant currency: EUR 26 million (up 9% year-over-year); operating profit remained flat at EUR 23.8 million, with margin expanding to 33.2% from 30.4% year-over-year.

• One-time provision of EUR 7.3 million for a discontinued Middle Eastern customer, impacting net income.

• Net income for 2024: EUR 8.3 million, reduced by the one-time provision; adjusted net income rose 39.3% to EUR 15.6 million.

Outlook and guidance

• 2025 guidance: low to mid single-digit revenue growth in constant currency, EBIT/operating margin to improve by 2 percentage points, and free cash flow >EUR 4 million in real currency.

• CapEx to sales to be reduced to 10%-12% by 2025.

• DSO days targeted to reduce to 100-140; continued focus on improving collections and reducing currency risk to 10%-15%.

• Dividend policy initiated, with plans for consistent and growing payouts; first dividend of EUR 0.01/share paid for 2023.

• Board continuity and further improvement in diversity are prioritized; strengthened investor relations expected to improve transparency.