Earnings call transcript: CM.com Q4 2024 sees stock dip amid AI focus

Centimeters.com (CIEM) reported its financial results for the fourth quarter of 2024, highlighting a strategic shift towards becoming an AI-first company. Despite a 13% increase in full-year revenue to €74.5 million and improved gross margins of 30.3%, the company’s stock fell by 7.09%, closing at 6.55 USD. According to InvestingPro data, the company’s gross profit margins remain challenging at 12.3% for the last twelve months, while the stock has shown significant volatility with a beta of 1.52. The market reaction appears to stem from uncertainties surrounding the company’s future performance and execution of its AI strategy.

Key Takeaways

• Full-year revenue grew by 13% to €74.5 million.
• Gross margins improved to 30.3%.
• Stock price dropped by 7.09% following earnings release.
• Focus on AI-driven growth and efficiency.
• Positive free cash flow achieved in the last six months of 2024.

Company Performance

Centimeters.com reported a strong financial performance for the full year of 2024, with revenue increasing by 13% and gross profits rising by 6% to €83 million. The company also achieved a record normalized EBITDA of €18.1 million and positive free cash flow in the latter half of the year. Operational expenses saw a significant reduction of 18%, and headcount was trimmed by 6% to 666 full-time equivalents.

Financial Highlights

• Revenue: €74.5 million, up 13% year-over-year.
• Gross profit: €83 million, up 6% year-over-year.
• Gross margin: 30.3%.
• Normalized EBITDA: €18.1 million.
• Operational expenses: Reduced by 18%.

Market Reaction

Despite positive financial metrics, CM.com’s stock price fell by 7.09%, closing at 6.55 USD. The stock is trading closer to its 52-week low of 5.57 USD than its high of 8.94 USD, indicating investor concerns. While the stock has shown strong momentum with a 23.9% year-to-date return, InvestingPro analysis suggests the company is currently undervalued. The decline suggests skepticism about the company’s AI-focused strategy and its potential impact on future earnings, particularly given that analysts don’t expect profitability this year. For deeper insights into CIEM’s valuation and 6 additional ProTips, consider exploring InvestingPro’s comprehensive analysis tools.

Outlook & Guidance

Looking ahead, Centimeters.com expects its EBITDA for 2025 to be in the range of €18-20 million, with gross profit anticipated to grow while keeping operational expenses stable. The company plans to expand its Halo AI platform and focus on AI-driven growth and efficiency.

Executive Commentary

CEO Jeroen Verklaabeck emphasized the company’s strategic shift, stating, "Centimeters.com aims to become an AI-first company." He also highlighted the potential financial impact of their AI solutions, noting, "We expect clients to pay double the amount per resolution with Halo." Verklaabeck underscored the European focus of their development efforts, saying, "We developed this project in Europe with European developers for the European markets."

Risks and Challenges

• Execution of AI strategy: The company’s shift towards AI could face challenges in implementation and market acceptance.
• Market competition: Increasing competition in the AI and CPaaS sectors could pressure margins.
• Economic conditions: Broader economic factors could impact growth prospects and investor sentiment.
• Regulatory environment: Compliance with privacy and data protection regulations remains critical.
• Payments business challenges: Addressing issues in the payments unit is essential for sustained growth.

Q&A

During the earnings call, analysts inquired about the refinancing of a €100 million convertible bond and the capabilities of the Halo AI platform. The company addressed challenges in its Payments business unit and detailed its AI investment strategy, providing clarity on security and onboarding processes for new AI solutions.

Full transcript - CM.com NV (CMCOM) Q4 2024:

Serje Enemann, Head of Investor Relations, Centimeters.com: Good morning, all, and welcome to the full year 2024 earnings webcast of siem.com. My name is Serje Enemann, Head of Investor Relations, and I will coordinate this webcast on behalf of siem.com. As you probably are aware, we will first show a video summarizing the key highlights of 2024, after which we will highlight further the details of the comprehensive refinancing package we announced last night and equity placing that we completed overnight. After all that, we will have a Q and A session with the analysts present on this call. Sitting next to me here today are Jeroen Verklaabeck, CEO and Co Founder of Centimeters.com and Jorg de Graaf, CFO of Centimeters.com.

They will present the highlights in the upcoming video and later answer the questions of the analysts present in this webcast. Before we start with the video, please be reminded of the forward looking statements for this presentation. If you choose to continue and watch the video, you are bound by these statements. With this out of the way, I would now like the operator to start the video.

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Last night, Centimeters.com announced a complete refinancing package for its outstanding convertible bond of EUR 100,000,000. We are paying back the bond early as our financial strength has improved substantially. Now is the time to fully focus on business opportunities and optimize the conditions for further growth. The past period, Schirm dot com has been working with HSBC, Avian Amaro and ING to come to a full depth package to refinance the convertible bonds. This resulted in a loan that is sufficient to launch a tender for the outstanding convertible bonds.

Major bondholders already have offered their support to tender the bonds at a level we can act upon now. We have sufficient support to launch this bid for all outstanding bonds. Next (LON:NXT) to that, Centimeters.com has announced an equity issue with the support of several high quality investors. Those investors are both existing shareholders and new investors. The money will be used to strengthen our ability to grow further in AI.

We are confident that we can give our growth a push with the support of such a strong investor base. Centimeters.com published the results of the second half of twenty twenty four, and we look back on a strong performance. The strategic focus on growing our bottom line performance has resulted in new record levels of EBITDA and gross profits. Also a tight grip on our OpEx remains. That means that we have outperformed the guidance we issued in the summer of twenty twenty four.

Our pipeline continued to evolve and we launched exciting new innovations. This will keep us at the forefront of innovations going forward. Last year, we celebrated our twenty fifth anniversary. And business wise, we had a record performing year. The implementation of the four business units has supported the bottom line performance.

The aim of the business unit structure was to improve the efficiency. And after the first year round, we see that centimeters.com is now better positioned for profitable growth in the future. Zooming in on the operational performance in the second half of twenty twenty four, centimeters dot com made a good progress on launching new products, such as the launch of RCS and the constant innovation of artificial intelligence. We launched our Playground AI, and just last week, our Agentic AI studio to create agents. More new brands connected with cn.com, and existing clients often extended their contracts.

The interest in our technology and services is clearly increasing from international clients. Players who operate on a global scale. As clients seek possibilities to obtain more services and products from one vendor, they reach out to cn.com’s 1 platform solution. As we grow our AI capability further, we expect to offer more and more exciting new capabilities around AI based software solutions. Cn.com aims to become an AI first company.

The solutions we offer to our clients are expected to support further margin growth going forward. Growth in our engaged business unit and across all business units of cn..com. What made these developments special was the fact that while we were strengthening our performance, our OpEx declined with 18% versus last year. That was more than we guided for in 2024. Centimeters dot com has completed the integrations of the various platforms acquired through acquisitions.

Centimeters.com will continue to operate from one platform and use partners to speed up growth globally. Looking ahead into 2025, OpEx is expected to remain stable and we remain mindful about realizing profitable growth. CN.com will continue to develop its capabilities and quality. With the equity rates, we will be able to give our growth a greater push going forward. We will focus on growing our top line and bottom line and also focus on remaining proactive and growing our tech stack further to assure that centimeters.com remains at the forefront of innovation for the next twenty five years.

Now I would like to hand it over to our CFO, Jorgen Graf. He will zoom in into the financial performance of 2024.

Jorg de Graaf, CFO, Centimeters.com: As mentioned by Jeroen in his opening remarks, Centimeters.com realized record levels in gross profit and EBITDA because of the shift in strategic focus to value growth over volume growth, which we regularly highlighted in the past. In the fourth quarter of twenty twenty four, our financial performance remained strong. Gross profit grew 6% year over year to 21,800,000.0 and gross margins reached 29.2%. Top line growth accelerated as revenue grew 13% to €74,500,000 As of the second quarter of twenty twenty four, Centimeters dot com has returned to consistent revenue growth, resulting in a positive year over year revenue development for full year 2024. Following this performance, our 2024 gross profit grew 6% as well to a record level of €83,000,000 and our gross margins improved to 30.3%, demonstrates that the strategic shift in focus has improved our business position and strengthened the ability to grow earnings organically.

The implementation of our new business unit structure added to that performance as the decentralized organization strengthened customer centricity, improved efficiency and enhanced internal alignment. Now let’s zoom in on the financial performance of the different business units in the fourth quarter twenty twenty four. First, Knecht. In Knecht, we saw an acceleration of growth in the fourth quarter as top line grew by 16.3% year over year to €61,300,000 That pushed the total revenue for Knecht in 2024 to €220,000,000 an increase of 3% versus 2023. Our messaging business had good traction in the holiday season.

Next to that, centimeters.com attracted more volumes from a large global platform with headquarters in The U. S. As a result, gross profit grew 8.3% in the quarter, bringing full year gross profit growth for Connect to 7.1% at a level of EUR 40,300,000.0. Gross margins remained at 18% in the quarter, resulting in a stable 18% gross margin for full year 2024. The number of messages processed also grew by 18% and ended well above the 8,000,000,000 mark with 2,100,000,000 messages processed in the fourth quarter.

In Engage, we also had a strong finish of the year. The demand for our customer engagement software accelerated, leading to 15.6% revenue growth to €7,700,000 and an increase of our gross profit by 13.6% to €6,700,000 in the fourth quarter. That supported an overall result of EUR 28,500,000.0 in revenues and EUR 24,800,000.0 in gross profit in 2024, both increases of about 10% year over year. Gross margin stayed strong at 86.9%. This was driven by ongoing strong order intake.

The pipeline in Engage is developing well and is expected to grow further in 2025, supported by the launch of our Agemtik AI solutions last week and the AI Playground tool in the fourth quarter twenty twenty four. This creates a foundation for the transformation of cn.com into an AI first company. Our upgraded software proposition will play a prominent role in the product offerings going forward to both new clients and in the upselling to our existing customer base. In our business unit pay, we made great step forwards in our product offering by technical improvements such as enabling offline payments with our Pulse. We also went live with our processing platform for Visa (NYSE:V) and Mastercard (NYSE:MA) and simplified our tech stack by consolidating our platforms.

Looking at the performance in Pay in the fourth quarter, we saw that our POS offering did well, but our online proposition faced strong competition. That affected our top line development and our gross profit, although our gross margins rose. Centimeters.com is addressing this and expects performance to improve going forward. That brings us to the business unit live. In life, Centimeters.com was on 4,900,000 tickets in the fourth quarter of twenty twenty four, pushing the total number of tickets sold to 19,300,000.

That is an increase of 4% year over year. Revenue grew 7% year over year to EUR12.4 million and gross margins remained healthy at 85. The international traction of our live product offering grew as intended with some eye catching order wins in France and The UK in the fourth quarter. Looking ahead into 2025, we’re confident that our offerings in the music and live industry, as well as in museums and parks, remain market leading, enabling ongoing future growth. Already, our pipeline for 2025 has grown.

Now that we have reviewed the financial highlights for business units, let’s zoom in on our OpEx and EBITDA development in 2024. As stated before, Centimeters.com has been working on improving its efficiency by lowering OpEx while growing gross profits, resulting in significant EBITDA expansion. Our OpEx is mostly linked to personnel related expenses. In the past two years, we have optimized our cost base through natural attrition, process redesign and focus on areas where our investments in growth yield the highest returns. In doing so, and continuously focusing on hiring the right talents, we have improved the quality of our organization.

At the end of twenty twenty four, headcount was down 6% year over year to six sixty six FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es at the end of twenty twenty three and twenty eight percent lower than at the end of twenty twenty two. As a result, total OpEx fell by 18% year over year to 66,500,000.0 as we kept a tight grip on non personnel related expenses as well. This performance means that we have met our full year 2024 guidance to lower our normalized OpEx by at least 15% overall. Regarding our normalized EBITDA, there we reached a record EUR18.1 million in 2024, ending just above the top end of the guided range of EUR 16,000,000 to EUR 18,000,000. Our normalized EBITDA in the fourth quarter was EUR 5,200,000.0, which is also a quarterly record.

Our unrestricted cash balance at the end of twenty twenty four remained solid at just over million. Free cash flow turned positive in the last six months of 2024 to million, thereby bringing total free cash flow for the year to million, another big milestone in our financial performance. Underlying the turn to positive free cash flow lies to growing EBITDA that now exceeds our CapEx investments. That trend of a widening surplus of EBITDA over CapEx is expected to continue in 2025. The strong development of our free cash flow in the second half of the year was also supported by improving working capital.

As part of the annual review, Centimeters.com decided to take a goodwill goodwill impairment of €8,800,000 on its pay business to align the valuation of historic acquisitions with current valuations in the payment market. The impairment is obviously non cash and has no impact on the EBITDA performance of Centimeters.com. With the strong set of financials, we have in 2024 achieved our key milestones of returning to material positive EBITDA generation and turning free cash flow positive. While we will remain very disciplined on our cost levels, we will now be able to shift full focus back to creating amazing products and accelerating growth. And with that, I will hand it back over to Jurgen for our outlook.

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: In 2024, ciem dot com improved its organizational structure and performance and grew its sales pipeline. The proposition of ciem.com expanded with new innovative tools and services. The presence of ciem.com in the world of artificial intelligence is growing rapidly. In an environment that constantly changes, centimeters.com has improved its ability to generate cash and grow its business. Centimeters.com is ready for the future.

In 2025 centimeters dot com continues to focus on growing its bottom line performance, converting its sales pipeline and growing its tech stack to become an AI first company. That means for our outlook into 2025 and beyond that EBITDA is expected to reach a level in the range of million to million. Gross profit is expected to grow. OpEx is expected to remain stable year over year. Thank you for your attention.

Let’s hand it over to the operator for the Q and A session with the analysts. We look forward to your questions.

Serje Enemann, Head of Investor Relations, Centimeters.com: Before we go into Q and A, I will first hand over to our CFO, Jorg de Graaf, to provide further details on the comprehensive refinancing package we announced overnight to refinance the convertible bond and the equity placing that we completed overnight.

Jorg de Graaf, CFO, Centimeters.com: Yes. Yesterday evening, aftermarket, we have launched a tender offer to buyback the 100,000,002 percent coupon convertible bond we issued in September 2021 that matures in September 2026. We’re offering 85.5% of nominal value with an early takers incentive of 1.5%, so total 87%. At this moment, around 90% of the bond has already been committed, and we expect to reach complete or near complete redemption quickly. In the upcoming bondholders meeting, the terms of the remaining outstanding bonds, if any, will be adjusted, resetting the maturity to September 2031, still with a 2% coupon.

To finance this repurchase, Centimeters.com has entered into an 80,000,000 RCF facility with HSBC, ABN AMRO (AS:ABNd) and ING Bank with an initial term through January 2028 and with the option to extend beyond that. The margin is dependent on the leverage and will be around 500 basis points on top of Burybor. Also, we have launched and successfully completed a capital raise through an accelerated book build of EUR 20,000,000, strengthening our balance sheet and supporting our continuous investments in growth and exciting new products. The book was well overscribed with strong support from our cornerstone investors and participation of the entire management board of centimeters.com, who have committed to a lockup of one year. The ABB (ST:ABB) was placed at a price of representing a 4.9% discount to the closing price of Wednesday.

We’re very happy with this transaction as it gives us a much strengthened balance sheet, allowing the company to fully focus on accelerating the growth of our business and staying at the forefront of innovation.

Serje Enemann, Head of Investor Relations, Centimeters.com: Thank you, Jorg. With this, we can now enter the Q and A with the If you have questions, I would like to ask the analysts to raise their hands in the screen. Simon Hoehnberg of ING, could you please begin with your questions? Please go ahead.

Simon Hoehnberg, Analyst, ING: Sure. Thanks, Serge. First quick question on bonds. What’s your plan with regards to buying back the bonds? Will you first utilize the RCF and use cash for the remainder?

The RCF has a length of three years initially, I read, with some extension options. What’s your plan on refinancing this? Then on the last few years, you’ve proved a lot on you’re focused a lot on improving efficiencies, value over volume. Is it fair to say that you look at 2025 as a growth acceleration year again? Combining

Jorg de Graaf, CFO, Centimeters.com: this with what

Simon Hoehnberg, Analyst, ING: you said about investing in AI, you also mentioned that OpEx is expected to remain flat year over year. Can you elaborate a bit more on your AI investments there? And how do you expect to have more efficiencies within OpEx if it’s expected to remain flat while you increase investments in AI? And then the last one is around your new agentic AI solution, Halo, which you launched last week. Do you see Halo as more of a vertical agentic AI solution focused on a few key areas, for example, one of which could be customer service?

Or is it more of a horizontal solution? And how does HALO compare to competitors? Thanks.

Jorg de Graaf, CFO, Centimeters.com: Thank you, Damon. Let me answer the first question and then I hand over to Joon. So yes, we are using the facility with the banks to buy back the bond, and we issued a new share capital to strengthen our balance sheet. We plan to look at ways first of all, we plan to grow our company, grow our profitability as we have been doing, and that we believe will allow us also to have a fresh look at our financing structure within a year, maybe two years from now. And it may very well be possible that we are going to put a new facility in place at that point in time.

But for now, we’re very happy with the facility we have and the flexibility it offers us. And yes, we’re very happy with it.

Simon Hoehnberg, Analyst, ING: Yes.

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Thank you. Yes, and also good to add, we have a discount on the bond buyback. We buy that for 87,000,000, we have a discount of 30,000,000, which go straight in our equity. So that’s a great deal. And then about efficiency, yes, we expect a lot from AI to make our clients more efficient and more successful, but also centimeters.com itself is becoming an AI first company.

That means that in every process within the company, we add our own AI capabilities of our halo program. So that means like if you have like this week, there’s an onboarding for new employees, part of the onboarding is halo training. This week, we also had a leadership course for our management. Part of the course is halo training. Also this week we had a talent program, we call it CMBA, also part of that is halo training.

So every department within Centimeters is implementing AI solution based on our own AgenTic AI platform, which makes us much more efficient. So that’s why we believe that we will accommodate our ongoing accelerating growth with the same group of employees as we have today. We don’t need to have more people to accelerate the growth because we are becoming more and more efficient because we add and we infuse AI technology in our own proceeds as well. Our cofounder, Gilbert Goyers, leads that program, and I could say he is 20 fourseven involved with implementing smart AI solutions within every department within Centimeters and that will make us more efficient. And then, about external part of this platform, our agentic AI platform, Halo, was introduced a week ago, last Thursday, very well received.

We had hundreds and hundreds of clients in our theater in Breda, the head office, but also thousands of people watching us online. And I walked in our sales department yesterday and there were full speed ahead with doing demos every hour for new and existing clients and also making orders. So we expect obviously a lot of it. We haven’t included that in our figures or outlook yet. We will do so after the Q1 figures in April, and we will also give more guidance about the expected growth in our upcoming Capital Markets Day at May 15 this year.

And then back to your question, Tayman, about whether we address verticals of horizontals. I think by now it’s very clear that our halo project is really broad. It really helps and enables businesses to become more successful based on AI. And indeed, if you look back the last few years, we were focusing on mainly two verticals. One was customer contact, we automated customer contact and we helped

Jorg de Graaf, CFO, Centimeters.com: and

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: assisted contact agents, we did both with Conversational AI and with our Mobile Service Cloud that was very successful, mainly based on the Gen AI capability we have in the platform. So we assisted agents or we answered questions, that’s what we did. Next to that, we added another vertical and that’s marketing. Great brands around the world adapted the Centimeters Mobile Marketing Cloud to do the marketing on one platform. We onboarded Pay Net All, we onboarded Red Bull and other brands.

It was great to see that, yes, a lot of brands found a solution with our Mobile Marketing Cloud that they could do multichannel marketing based on a very strong customer data platform infused by GenAI technology. But that was until last week.

Jorg de Graaf, CFO, Centimeters.com: It

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: was the time of AI assistance. Last week, everything changed. Since last week, we now have Agentic AI and there, AI makes plans and it executes actions. For that, our clients need a lot actually. It’s not an add on on Gen AI.

No, it’s a new platform built from the ground up. What it includes is, you have to, our halo projects program is aware of all the processes active in the company. So that’s one. It’s also aware of all the knowledge in the company based on internal documents, based on web search, based on crawl, based on all sources within the company. So it is aware of all the knowledge.

Third, it’s also aware of the full application landscape of a client. So all the tools a company might have for their CRM or ERP or bookkeeping, they can connect it to halo and then it’s also aware of and it can execute task in all the systems. So that’s third. Then it’s aware of all the brand tone of voice. And the fifth thing is, and that’s very special, it understands the governance model of our clients.

So it knows about all the roles and responsibilities of all the employees. So, it’s a mouthful, but these five new things, which we added in our Halo platform, enables businesses to really automate work processes. And then back to your question, is it a typical vertical approach or horizontal? I think we can really implement this AI workforce in all type of departments, whether it is indeed marketing or support, where we came from originally, but now we can also help all other departments within a business to automate processes based on AI. So it’s a huge addressable market, way bigger than they used to have, but it is something the clients asked for.

It’s not that we invented this out of nothing. We were in close contact with our clients and they saw the capabilities of our platform, but it did for their clients. And the employees just asked the same. Employees of our clients, they said, I want to have the same answers to my questions as we’re giving our clients, because I am also looking for information, I also want to automate that. So that’s where it came from.

Indeed, we see a broad market for this and many applications. I can give you an example for just a real life example. Last week, I was in our office in India. In India, I was there and within the office, we had a new application, a job opening. In one day, we received 1,500 applicants for this job.

And now, we had to choose who to invite for an interview. And what we did with our own platform is, we scanned all the 1,500 resumes. We looked up we said, okay, these people, they must have studied somewhere. And during the study as an engineer, they might have made software. It’s maybe we can find it online on GitHub or other software repositories.

We looked at our AI system, looked at all the software they made in the past, they made a review of that and a summary, and then it’s made a listing of the top 10 applicants based on the 1,500 applicants for these jobs. And based on that, we were able to pick the top five out of 1,500 applicants just in a matter of minutes and we knew who to invite. This process would have been very cumbersome, let’s say, a year ago. And now, we can do it just with our Halo platform in minutes. This is just one example of an HR job for finding a new developer in India.

It’s just one example, but it’s yes, it’s an example of how broad the application is, which we just delivered. Thank you, Jeroen.

Simon Hoehnberg, Analyst, ING: Very clear.

Serje Enemann, Head of Investor Relations, Centimeters.com: Did that answer your question, Jaime?

Simon Hoehnberg, Analyst, ING: Yes, very clear. So it therefore seems that the opportunity with HALO is significantly bigger than with previously launched AI products, right, such as the generative AI platform.

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Yes, you are far better at summarizing the answer than the last time you gave us.

Serje Enemann, Head of Investor Relations, Centimeters.com: Okay. Thank you, Taim. And then I would like to hand it over to the next analyst, Wim Hille of ABN AMRO. Wim, could you please go ahead?

Wim Hille, Analyst, ABN AMRO: Hi there. Can

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: you hear

Wim Hille, Analyst, ABN AMRO: me? Yes. Perfect. Thank you very much. Wim Schiller from ABN AMRO Odor.

I have a few questions. First on Engage. Obviously, a very good momentum there and we finally saw the much anticipated acceleration in growth with Q4 growing at 15% or north of 15% year over year. What can you tell us about the momentum that you expect in the first half of twenty twenty five? Can we sustain this momentum?

Should we still expect some strong double digit growth in Engage based on what you currently see in your AR and the contracts at hand? Did you increase pricing for existing clients on the first of Jan? Or do you have, let’s say, a different cycle there? And also, can you give us a bit more core on how the sales funnel is developing? So which types of companies are you currently talking to and dominate the pipeline?

How big is the pipeline compared to a year ago? Are you looking at small, large, local, international companies? What kind of ticket sizes do you expect from these clients? Are your sales cycles is growing, slowing, etcetera? So can you give us a bit more feeling on how that sales funnel is developing so that we can have a better view on 2025 and beyond?

And then the second question will be on pay. That is turning into a genuine concern at the moment with the lack of momentum that we have over there. Obviously, last year, you finished the development of your own processing platform. It was a long process and you spent a lot of money on that. And we should have expected the take rate to go up, yet it went down.

Revenues coming down. I understand fierce competition in online, but that’s a bit of a too generic answer, if you will, on what is going wrong there. So I’d like to have a bit more insights into the pay business. What is the current revenue mix looking like, like POS versus online? How much gate software revenues do you still have in the mix?

Do you have a concrete plan to turn this thing around? How much goodwill do you have left on the balance sheet, etcetera? This will be my two very long questions. Great.

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Should I start? Yes, Wim, thank you. Engage, momentum, acceleration, yes, that’s true. We saw a lot of growth acceleration in both Connect as engaged for the last quarter. So that’s great.

And now, yes, we have to predict how that will play out in the first half year. Now the momentum is, still great, it’s even better since we launched Halo. We have full time every hour for day, we are making giving demos, we are writing orders. We don’t know We expect a lot, I must say, but really to We expect a lot, I must say, but really to quantify that. We need a bit more time because we just announced it last week.

But in general, so if you look at CPaaS and engage in a broader sense, yes, we see a good momentum for those products. Yes, where are we focusing on? It is now for Halo, we started last week with our existing clients. For them, it’s an easier step up to implement it. They are already on board on our system.

They have already the data in our platform. The people are used to work with the Centimeters.com platform. And there, basically what we do commercially is we double the price. So with all the clients we have for Engage, we have already a price agreement and we say, you pay us a fixed fee per answer. That’s what we used to do.

We pay a fixed fee per answer. Our platform generates answers. But now it executes tasks and we figured out that it has doubled the value. So in a broad sense, you could say that the pricelist doubled. Our clients need to pay twice as much for task executed by Halo compared to an answer given Conversational AI.

So that’s a quick win for us to go to existing clients and they’re really happy to take this step with us. They are very enthusiastic of the capabilities and you see the value. That’s the first response we have last week. But this is still early days, of course. And then, second step is also to reach out to new clients.

This week already, we had a big show in The Middle East, the LEAP Convention, where we launched this for the Middle East region, also a lot of traction there. And if you look at where are we selling this, this is across the globe. In this we have lease for this in India, we have lease for this in The Middle East, all over Europe, also in The UK and France, but also in The U. S, and also South Africa and Asia. So everywhere we are, we are selling this.

We took already the time in the last month to train our sales force and then now selling this. So let’s see how that goes. What is our target audience? Yes, like always, it’s a bit the mid market. We see the longest sales cycles in the upper market, in the enterprise market, big companies, so we avoid that a bit because we want to have a lot of possible deals and short sales cycle.

We find it in the mid market. There’s also like a really small companies. It is beneficial for them as well, but there we see lower revenues per client. So the most efficient way, the most scalable way we found is in the mid market for these products. And that’s also a place where we have we do see competition, but we have a strong product, it’s way advanced competition and it’s also a European developed product.

And in this case, that’s important. AI is enrolled all over the world, but you see that it is there is a division between the different superpowers of the world, so like U. S, China, Europe, India, other places, you see that a lot of enterprise and large companies, but also in the mid markets, they really value our European values. We developed this project in Europe with European developers for the European markets, with the European rules and regulation in mind when we developed that. And that’s something that our U.

S. Based competitors just didn’t do. You see that in practice, if you look at the new Apple (NASDAQ:AAPL) iPhone, AI features are not launched in Europe because they were developed not with the European mind of legislation in mind. So that’s why we see a strong demand in Europe for this European AI solutions. Also, what happened in the last days, yesterday in Paris with a big AI summit there.

Yes, you see that the European Union is now getting away and see the opportunity for AI and supporting it more and more and you see that also with our clients. So, au mid market, short sales cycles, first to existing clients, later also new clients that’s our game in Engage. Then to Pay, yes, we have four different business units. Most of them were very successful and Pay was a bit behind indeed last quarter. We’ve seen it as well.

We’re looking at that. We’re working on that. Indeed, the focus last year was in the background, in the software, in the hardware, in the technology behind it. We build a great platform and our own processing platform online clients who are already converted. This year, we will also convert the point of sale devices.

We have a strong proposition there, but we need to sell it. So we are building now pipelines based on our new our renewed products offering. If you look at revenue mix, we are we were quite successful in point of sale. If you go around in The Netherlands, you see you find more and more places where you see the cm.com logo on the pin terminal, but online struggled a bit, fierce competition and also maybe some lack of attention from our own sales because we were working in the background on the product itself and a lot of new things are coming out anytime soon and then we will expand that further. It’s a very interesting market to pay.

Everybody pays everybody needs to receive payments. It’s a big market. It’s certainly part of the new world where people do everything with the mobile phones. But it’s a long play, and we see indeed more momentum in the auto business units really right now than in payments. But we have a good plan.

We’re executing on that. We have the right product, right plan. And then but indeed, we as you saw, we impaired the goodwill of payments. We’ve chosen that because we saw our revenue was lower than expected. And yes, we bought we did a few acquisitions in payments in the past in the time where fintech was much more of a valued standard is today.

So that’s why we impaired the goodwill to zero actually, yes, a bit in Jurg. So yes, of course, not that there’s not a cash effect, it’s also not a P and L thing, it’s just on the balance sheet. But that’s a bit payments. Yes, I can tell much more about because I’m very enthusiastic about all the opportunities we have there and the things we’re working on, but I leave this for later. I think also during the Capital Markets Day, we will share more information about our strategy behind this.

Serje Enemann, Head of Investor Relations, Centimeters.com: Did that answer all your questions, Wim?

Jorg de Graaf, CFO, Centimeters.com: Well, I have quite a few

Wim Hille, Analyst, ABN AMRO: detailed questions on the mix, etcetera, but let’s take them offline and see how that works out.

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Robert Finck of Kepler Cheuvreux. Robert, please go ahead with your questions.

Robert Finck, Analyst, Kepler Cheuvreux: Yes, thank you. Firstly, I have a question about the Connect. The gross profit growth of the Connect business improved significantly during the second half year as compared to the first half year. And in your press release and during your presentation, you mentioned specifically that a major global tech platform increases traffic to your platform. I have some questions about this.

Firstly, can you give some color why you think this platform increased traffic through your platform? Maybe you can explain what type of CPaaS solution they consume in which regions are these communications may be done? And secondly, can you elaborate further on what drove this gross profit growth acceleration at your Connect business during the second half? Is this mainly driven by this global tech platform or are there also other drivers that we should know about? And I also have a quick question about the annual recurring revenue.

We see that in the fourth quarter annual recurring revenue shows a very small uptick of growth compared to the third quarter. Yes, is this driven by churn or lack of new order intake? Yes, maybe you could provide some color on that. And it would also be interesting to understand how you think about the Halo. IE platform.

I understand that currently you have not included this AgenTek AI platform in your guidance. However, maybe you could elaborate how the pricing model of this new Halo platform will work? Is that mainly going to become recurring revenues? Or will it maybe also consist of some volumes?

Jorg de Graaf, CFO, Centimeters.com: Yes. Thank you, Robert. Let me answer the first two questions and then for Haydel, I hand back over to Jeroen. Yes, so on Connect, indeed, we see more traction there and more growth. I think what we started off with more than a year ago was, of course, had this value over volume strategy here, where we just basically reduced the volume revenue, but increased our gross profit and focused on gross profit.

Now this is sort of completely embedded in how we do our business, and that means we’re focusing again there on growth. And we do see a lot of developments in this market that actually are driving growth. So SMS is still growing. We see OTT as a channel driving growth. And also, we see large opportunities, both in voice and in e mail.

So in that sense, all these communication channels give us avenues for growth that we are focusing on and in different stages of capturing that opportunity. What we also see typically within our Connect business is that there is sort of a large part of our normal business, regular business, and it always sort of an outlier where we have in one or two quarters a little bit more and then it’s a bit less. We had during COVID, we had a lot of voice traffic in the beginning of twenty twenty four. First half, we had a lot of OTT traffic for certain campaigns. Now we do see an acceleration in terms of more SMS messages as well.

So I think it’s sort of also a constant that it’s there is a bit of volatility in our business there, but the underlying trend is strong, is growing. We increased our gross margins over the last two years to 18%. That’s nice and stable. And we do business with all the very big tech platforms in the world. And since they have massive amounts of volumes, yes, we try to pitch for those volumes and attract that business.

We’ve been quite successful in doing that. And yes, as these platforms grow, we grow with them and we prove to be a good partner and increase our share of wallet. So this is part of our strategy that we are successfully executing and we think that’s the reason we get this traffic is simply because we have the best offer and we have the best quality, the best price, the best secure solutions and are able to combine that with many other channels as well. So that’s I think in general on Connect and gross profit growth there. Then on your ARR question, you’re very right, Hans.

So the optics are a relatively small ARR growth in Q4 versus Q3. I think it makes sense to give a little bit more color on that. So first of all, in the first quarter, we sort of refined our methodology of how we define ARR that led to a small adjustment one off in Q4. So that shows a little bit different, but the underlying improvement that we see versus Q3 is about $500,000 The other thing that’s good to know is that ARR consists of all the recurring revenue streams we have within our company. And actually, in every business unit we have, there is an element of recurring revenue.

Now the most focus of growing recurring revenue, obviously, is in our Engage domain. And if you look at that then you see that the ARR growth in Engage, so year over year, is 9% or 10%. There’s other elements like some legacy Connect subscriptions that we have that are not growing or maybe even declining a little bit because we’re moving them to different business models. So therefore, in the mix, you see about a 6% growth, but the focus for us is on growing that recurring revenue within Engage, and there that is a healthy 9% or 9% to 10% year over year. Jeroen, then I hand back over to you for Halo AI and the pricing model.

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Yes. So Halo AI, yes, we expect a lot of it, more efficiency for ourselves, more efficiency for clients, plus our more revenue for centimeters.com. Yes, we it’s too early to include all the expectations we have for LOI in our guidance at the moment, so it’s just not. But yes, we do have a price model on average. Yes, we know that our clients are willing to pay double the amount per resolution, which we provide with Halo than they used to pay per answer with our conversational AI platform.

So our pricing model is quite simple. We just double the price per resolution compared to the answer. Now how do we sell that? Is it users based or ARR? Now the vast majority of our engaged clients, they pay a bundle price per year.

So our experts are in contact with our clients and then they predict the number of messages or answers they need for the next year and we agreed one price for one bundle. If people really use much more than the agreed upon, then they have to pay a bit extra. We do use that we call it over usage, which we also can invoice. But the majority of the revenue is secured in an annual recurring revenue contract. And the new contracts we see coming in for HALO have just a higher price point, yet double the price of what we used to see.

So we are converting now, firstly, the first clients we already have and then secondly, also we are signing up new clients. Yes, the sales cycle for the existing clients is a bit shorter because they know us, they trust us, they are already in our platform, they have the data available there, maybe the knowledge, maybe the point of voice we are aware, maybe the process we already have, so they can start a bit faster. So the first group of clients will be the existing clients where we have an upsell, so to say, or renewal which is just of one higher price and then we will have the second group of the new clients coming in. And how that will really work out for our revenue development in the course of next year, we have to wait to see a bit just one week. We launched it.

We will come back in the first quarterly figures in which we will release in April. Thank you, Jeroen. Did that answer your question, Robert?

Robert Finck, Analyst, Kepler Cheuvreux: Yes, it did. Very clear.

Serje Enemann, Head of Investor Relations, Centimeters.com: Okay. Thank you very much. Timon, I see you raised your hand for a follow on question. Please go ahead.

Simon Hoehnberg, Analyst, ING: Just a last quick question on halo. One of the key challenges with Enterprise AI Solutions are security risks. How do you address these security risks? And I was also wondering how quickly customers can actually get up and running with the Halo solution?

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Yes. Now let’s start with a quick how quick can they be up and running. We did everything to make it as easy as possible to onboard. If you’ve seen the release last week, it was still we can find it online on our website. It’s like a show of forty five minutes where we really show all the features.

If you haven’t seen it, please watch it because it’s a great explanation with because it’s a real live platform. It’s not like a vision we present. Now we present a platform that we developed and is ready for you. So the presentation was yes, we could really see the solution. So that was great.

How quick can you onboard now? Rudker, our Head of AI Development showed it. He really sat down in a chair and he just talked to the screen, to a Halo product and then our system listens what he said about the business processes of his company and then it designed a new business process for the clients and our system was also capable of connecting it to existing applications and starting this new process up just by his voice. Of course, you can also just type in the business process you want, that also works or you can upload policy documents or other description of your processes. So if you have a company, they have a written down of your business process, you can also upload it and it starts designing the work process.

So we did everything what we could possibly think about to really enable our clients to really be fast to yes, faster way to prove value as we say, you really want to prove the value of our system. But that’s just a starting point. So you start with a few processes. If you put them in the system and it starts working. You start with a few applications, few tools you have in your business and you describe a bit your landscape of software within your company and it already starts connecting that.

We’ve seen it, for example, with our client, AS Watson, who was the first client on Hello. We had to connect with a few legacy SAP systems within AS Watson. It was a matter of days, which we could connect more or less automatically by uploading the descriptions, by uploading the manual, so to say, of the system and it started developing its own connection more or less itself. So it was really fast time to market. So they expected that it would cost maybe half a year with a lot of consultants, but in general, it just took us a few days and that made us ready for the launch for Karlsfeld and Drekpleister just before Black Friday, which was a huge value for this client.

So, they were very happy and they saw this quick time to market. The same is also with knowledge, you can store all the knowledge, but indeed, what is the most important thing, it is security, it is about roles and responsibilities, about governance, because if you enable if you upload all the business processes and all the information and all the knowledge in your company into our system, of course, it has become very powerful. So you have to regulate that a bit with roles, responsibilities and that’s the most important part of our system is that our business can really yes, describe that, who is able to do what. So if our AI is, yes, going to do autonomous tasks, then of course, you always have to know on behalf of who do you do that and was he allowed to do that. And that’s the real hard work we put in this Halo platform.

It is all about this security, security of data, security of privacy and all those things. For example, privacy is very important that we are European. We designed this with a European legislation in mind and it means that we only we can guarantee our clients, we only use our own language models on our own chips, in our own servers, in our own data center. That’s really trustworthy. Or we can say, we only use language models hosted in the AU.

But whatever we do, we guarantee that for every time a language model is used, we never send in privacy data, personal information, we don’t send it in. So we strip all the questions we of all the knowledge we send into language model, we strip it from personal information, then the answer comes back, the language comes back and then we add it again. So, yes, a lot of security measures are in place there and that makes it really suitable for enterprise businesses in Europe and that is new, it’s advanced. It’s not what competition is doing right now. Of course, you will get competition in the future, but we really want to.

Yes, we are ahead and we want to have benefit from this, yes, from us being ahead with this halo platform. Thank you, Jeroen.

Serje Enemann, Head of Investor Relations, Centimeters.com: Then I see a follow on question from Robert. Robert, please go ahead.

Robert Finck, Analyst, Kepler Cheuvreux: Yes, thank you. Some questions about the Payments business. My first question is whether you can give some more color on the size of your online payments business relative to the total payments business that you have. This is kind of the part where you’re facing elevated competition. My second question about the payments business is, yes, since you now operate your segments as distinct business units, I would be interested to know if you could help us understand the impact of the pay business on the group’s bottom line and also for cash flow generation currently and going forward?

Jeroen Verklaabeck, CEO and Co-Founder, Centimeters.com: Maybe you?

Jorg de Graaf, CFO, Centimeters.com: Yes. Okay. So I think, let me answer your questions substantially. So the size of online versus total is not something that we specifically disclosed, but online is a little bit bigger than the in person payment part. However, in person payment is growing, is doing well.

So that balance is shifting and what we actually see is that the in person payment is going to be a also a facilitator for the transactional part because there where we are able to place our terminals, we’re often also able to put the gateway with our transaction processing platforms behind it. So in terms of how we orchestrate our commercial processes and strategy, often the in person payment part is first step in and then we are trying to migrate all of those volumes over to us as well. Sometimes that’s not happening in parallel due to contractual agreements, etcetera. But it’s it is a lead indicator for our growth also on the online part. And then the impact on the bottom line is also something that obviously we don’t disclose at this point in time.

I mean, the payment part is still relatively small compared to the rest of the organization. So in that sense, the impact is also limited, but we are we’re not disclosing specifically EBITDA or cash numbers on a business unit basis at this point in time.

Robert Finck, Analyst, Kepler Cheuvreux: Okay. Thank you.

Serje Enemann, Head of Investor Relations, Centimeters.com: Okay. Thank you all for your questions. This completes the Q and A. Thank you all for attending this webcast. Our next release will be the annual report on the March 13.

And after that, we will publish the first quarter trading update on the 04/17/2025. Please be reminded that the first quarter trading update does not include a webcast. That will be conducted again at the first half publication. For all other details and our financial calendar, please visit our Investor Relations website on ciem.com. This concludes the call.

Thank you all for attending.

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