Stable Performance with Improved Free Cash Flow

Q1 Results

• Net sales of EUR 16.9 million (16.3) +3.7% Year on Year, In constant currency,  
  EUR 17.1 million, +4.6% Year on Year. 
• Operating result of EUR 4.5 million (4.4) +2.3% Year on Year.
• Operating margin of 26.9% (27.2%).
• Foreign exchange losses reduced to EUR 1.4 million (1.7).
• Net result EUR 1.5 million (1.6) -5.6% Year on Year.
• Gross cash flow from operations EUR 6.4 million (1.0).
• Positive free cash flow EUR 1.0 million (-4.7).
• Earnings per share EUR 0.1 (0.1).
• Order book at the end of the period EUR 70.3 million (74.8).

Unless otherwise stated, all figures presented below are for the financial period 1-3/2025 and the figures for comparison are for the corresponding period in 1-3/2024.

Guidance for 2025

• Net sales are expected to grow by low to mid-single digit percentage in constant currency terms.
• Operating result margin expected to see margin expansion of at least +200bp (2%).
• Free cash flow guidance > EUR 4 million for the full year.
• Capex as a percentage of net sales is targeted at 10-12%.
• Receivable days are expected to range between 100-140.
• Dividend pay-out policy targets 10% of free cash flow.
• Foreign exchange exposure to frontier country risk will be reduced to 10-15% within three years.

Assumptions for 2025

• Industry analysts forecast that the long-term growth of the Business Support Systems (BSS) industry is forecasted to grow at +2.1% per annum 2022-2027. However, 2025 is forecast to be negative growth year. Despite this, Tecnotree still sees top line growth due to anticipated significant market share gains and the current order backlog.
• The company will continue its focus on increasing license sales, while evolving its delivery model to an Annual Recurring Revenue (ARR) model and continue to increase it in 2025. This will ensure that the company will have more predictable and stable quarter on quarter net sales.
• The cost optimisation programme that commenced in 2024 will continue to provide margin benefits in 2025 and beyond.

From CEO's Desk:

Resilient start of Q1 - 2025 with enhanced Cashflow performance

The first quarter of 2025 represents an encouraging start to the year, marked by stable financial performance and significant achievements in our strategic initiatives. I am particularly pleased to highlight our positive free cash flow generation of EUR 1.0 million, a substantial improvement from the negative EUR 4.7 million in the same period last year, demonstrating tangible progress in our cash flow optimization strategy.

Net sales increased modestly by 3.7%, underpinned by strong growth in license revenue. This strategic shift toward high-margin licensing agreements is aligned with our continued focus on predictable, stable revenue streams, primarily through our Annual Recurring Revenue (ARR) model. Our efforts in cost optimization have also supported profitability, reflecting effective execution against our margin expansion targets. We will continue our focus on cost optimization going forward. We have also reduced CapEx to Sales (product capitalization) to 14.7% from 20.8% in Q1 2024. This is facilitated by the fully invested nature of our market leading product stack.

Our order book reduced by 6.0% to EUR 70.3 million from EUR 74.8 million last year, which reflects the timing of contract deliveries in the quarter, as well as execution of our strategy to alter our geographic mix. Geographically, we have significantly increased our order backlog in Europe & Americas to EUR 12.1 million from EUR 8.7 million compared to Q1 2024, demonstrating success in our market diversification strategy and stronger presence in mature markets, while strategically reducing our exposure to frontier markets MEA & APAC regions. As a result, the percentage of revenues booked in volatile currencies in Q1 of 2025 has dropped to 15% from 45% in Q1 of 2024. Our bid pipeline remains strong and we expect to see the order book bounce back in the near term.

DSO days have significantly reduced to 155 days from the comparative quarter Q1 2024 of 216 days. This is one of the key contributors of a positive free cash flow for the quarter. By improved collections, we have been able to reduce trade receivables by EUR 7.4 million compared to Q1 2024.

Our brand equity continues to grow, with TMForum and Gartner recognitions for innovation in the areas of AI, 5G network monetisation, cloud services. Tecnotree is among the few ODA (Open Digital Architecture) Hero's as we have been agile in adopting frameworks for enterprises and consumers.  With a confident outlook for 2025, including targeted margin expansion and growth in recurring revenues, Tecnotree is well-positioned for sustainable long-term value creation.

We remain confident in our guidance for the full year 2025, particularly encouraged by our early success in achieving positive cash flow.

Thank you to our dedicated employees, customers, and investors for your continued trust and support as we strengthen Tecnotree's foundation for sustainable growth and shareholder value.

Financial Performance

Tecnotree has successfully transitioned toward generating positive free cash flow, driven by disciplined cost management and improvements in receivables collections. License revenue notably increased due to strategic deals. The decline in the order book was due to a deliberate reduction in frontier markets, while Europe & Americas segment saw strong order intake growth, indicating successful geographic diversification.