Translation: Original comment published in Finnish on 4/23/2024 at 1:18 am EEST. Tecnotree will publish its Q1 report on Friday at around 9.00 am EEST. We expect the company to deliver moderate single-digit revenue growth, which is also indicated by the company's guidance for the full year. We expect a slight deterioration in EBIT year-on-year and, with FX losses due to the devaluation of the Nigerian pound, net profit to be only marginally positive. In the report, we are again particularly interested in the company's cash flow performance and the outlook for this.  Moderate growth in expected We expect Tecnotree's Q1 revenue to increase by just under 4% to 16.1 MEUR. We therefore expect a significant slowdown in the growth rate, which is also reflected in the company's guidance for the full year. We believe that part of the reason for the slower growth rate is the transition of Tecnotree's business to the ARR model, with initially slower revenue generation as one-off license sales decline. We also expect the slowdown in growth to be driven by a general cooling of market demand, as operators become more cautious about major technological transformations in the current business environment. On the other hand, growth is supported by the strong order intake of recent quarters and a record order book (2023: 80.2 MEUR).   Exchange rates add uncertainty to earnings forecasts We expect Tecnotree’s EBIT to decrease slightly to 3.3 MEUR (Q1’23: 3.6 MEUR) which would mean an EBIT margin of 20.6%. Q1 is seasonally the weakest quarter for the company as low volumes are also reflected in profitability through a fixed cost structure. We expect cost inflation to continue to put pressure on profitability, but the company is actively seeking to mitigate this through its own efficiency measures. The growth in revenue also supports profitability through high gross margins. As in Q4'23, we expect the sharp devaluation of the Nigerian naira at the beginning of the year to result in significant FX losses. As a result, we expect EPS to be close to zero. In addition to the result, we will monitor the development of cash flow. There is a strong internal focus on improving cash flow (this year's internal motto: “Think cash, do cash”), but the company has not yet issued guidance for a year on cash flow repatriation at this stage. We expect the company to continue to make significant investments in product development. With depreciation levels still well below those of investments, their capitalization has a positive effect on profitability. Cash flow outlook of particular interest For the current year, Tecnotree expects its revenue to grow by 2-7% and its EBIT by 7-15%. We expect the company's revenue to grow by 5% to 82.3 MEUR and EBIT to increase by 9% to 25.9 MEUR. In recent years, Tecnotree's performance has been poorly reflected in its cash flow, so it is even more interesting to monitor the cash flow trend and future prospects in this regard. Tecnotree is actively seeking to change its business model to an annual recurring revenue (ARR) model, which should balance revenue and cash flow between quarters. This should enable the company to improve its cash flow this year. On the other hand, we do not believe that this change will significantly address the challenges posed by the geographic location of the company's customers, as illustrated by the significant FX losses in 2023.

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